iNVEZZ.com, Tuesday, May 20: AstraZeneca is facing fierce criticism from shareholders over its decision to reject a £69 billion cash-and-shares bid by US rival Pfizer (NYSE:PFE) in a move which has almost certainly eliminated the chances of sealing a deal.
The British drugmaker said in a statement to the London Stock Exchange yesterday that its board had rejected Pfizer’s proposal, noting that it undervalued “the company and its attractive prospects” (AstraZeneca share price: Board rejects Pfizer’s sweetened bid). The rebuff of the proposal, which would have given shareholders £24.76 in cash and 1.747 Pfizer shares for each of their existing shares, marked AstraZeneca’s fourth rejection of Pfizer’s advances, which first began in November.
Following yesterday’s decision, some investors have accused AstraZeneca’s management of letting them down by refusing to hold talks with Pfizer and called on CEO Pascal Soriot to hold negotiations with the American company to salvage the chances of pulling off the biggest pharmaceuticals merger in history.
Richard Marwood, a portfolio manager at Axa Investment Managers, said, as quoted by The Times: “We are extremely disappointed with the turn of events at Astra today. We don’t think the management have done a good job for shareholders at all. We had already told the Astra management that we wanted them to engage in discussions. It would need more of the other shareholders to come round to our view to get any movement.”
Soriot stoutly defended the move: “The board is very confident that we made the right decision. Nothing has happened today to make us believe we should change our minds or should have made a different decision.” With a deal likely to take a year to complete, the board needed reassurances about Pfizer’s ability to maintain the value of the proposal for its shareholders given the falls in its own share price in recent weeks, the CEO further remarked.
Deal not quite dead yet
Pfizer’s attempt to take over AstraZeneca is likely to fail because British law prohibits the US firm from improving its offer after declaring it final, according to people familiar with the transaction. It is understood that Pfizer is expected to announce that it will not make a formal bid by the May 26 deadline. But according to analysts and fund managers, AstraZeneca shareholders may still pressure the board to reconsider the offer.
Mark Schoenebaum, an analyst with ISI Group in New York, was quoted by Reuters as saying: "The deal is wounded, but perhaps not dead."
Pfizer spokeswoman Joan Campion said in an emailed statement: "The fate of the deal is now up to AstraZeneca’s shareholders. We believe our final proposal represents compelling and full value for AstraZeneca shareholders."
AstraZeneca share price reacts to events
AstraZeneca’s share price plunged more than 11 percent yesterday. The stock has extended its losses today, trading 1.18 percent lower at 4,237.00p, as of 10:25 BST.
Citigroup today added AstraZeneca to its Citi Focus List Europe, saying it is worth 4,900.00p a share. According to AnalystRatingsNetwork data, six research analysts have a ‘sell’ rating on the FTSE 100-listed pharma giant, 17 have it as a ‘hold’ and eight call it a ‘buy’. The stock’s consensus rating is ‘hold’ with an average price target of 4,087.57p.
As of 10:13 BST, buy AstraZeneca shares at 4,248.50p.
As of 10:13 BST, sell AstraZeneca shares at 4,247.00p.