By Hester Plumridge
LONDON-- AstraZeneca PLC's sixth-largest investor, Legal &
General Group PLC, is urging the U.K. drug giant's board to reverse
its rejection of a $120 billion takeover offer from Pfizer Inc. and
engage in talks, two people familiar with the situation said.
The investment arm of the U.K. insurer, which holds a 3.5% stake
in AstraZeneca, has written to the company's board asking it to
engage in talks with Pfizer, one of the people said. Legal &
General declined to comment. AstraZeneca declined to comment on
individual shareholder interactions but said it is continuing to
engage in general with its investors.
AstraZeneca on Monday rejected a "final" takeover offer from
Pfizer worth GBP55 ($92.89) a share. Under U.K. takeover rules, the
companies have until May 26 to enter talks or the offer will
expire.
Legal & General joins AXA SA, Schroders PLC and Jupiter Fund
Management PLC as large AstraZeneca investors that have expressed
disappointment at its rejection of the offer. Combined, they hold
around 7% of the stock.
Schafer Cullen Capital Management Inc., a New York investment
firm that says it holds around 1.5% of AstraZeneca stock in
accounts and funds managed on behalf of its clients, said it told
AstraZeneca Tuesday that it also believes the board should engage
with Pfizer.
"As long-term shareholders we view the Pfizer offer from a
price-consideration standpoint as attractive and would encourage
AstraZeneca's board to enter formal negotiations to discuss
business operating and regulatory details," the firm said in a
statement.
Jim Stride, head of U.K. equities at AXA Investment Managers
U.K., also urged engagement in a statement Wednesday. "Many
shareholders--but not necessarily all--will find this an attractive
offer," Mr. Stride said of the GBP55 proposal. "Accordingly we
believe that the board...was arguably wrong and acted too hastily
to dismiss the latest proposal from Pfizer."
One top-30 investor told The Wall Street Journal Wednesday, "I
think that the AstraZeneca board is under reasonable pressure from
a sizable chunk of its shareholders."
However, other investors, including Investor AB, Aberdeen Asset
Management PLC, Fidelity, St. James Place manager Neil Woodford and
Threadneedle Asset Management Ltd.--which have combined
shareholdings of around 8.5%--have spoken publicly in support of
the AstraZeneca board.
A spokeswoman for Threadneedle said Wednesday the company
continued to support the board's stance. "We feel the full
implications of the proposed acquisition haven't been sufficiently
understood and addressed by Pfizer," she said.
Fidelity Chief Investment Officer Dominic Rossi said he thought
Pfizer wasn't a "suitable partner" and that the deal was motivated
by tax and finance considerations. "The Astra board has taken a
very difficult decision," he said. "They understood in rejecting
the offer they would be criticized by some shareholders."
Many other investors, including top-five shareholders BlackRock
Inc. and Wellington Capital Management Inc., have declined to
comment on their views of the board's actions.
It would be a huge task to get enough shareholders to pressure
the board into reversing its position by 5 p.m. BST Monday--just 2
1/2 working days away. Monday is a public holiday in both the U.S.
and the U.K.
AstraZeneca shares were up 2.1% in afternoon trading Wednesday,
but at GBP44 they remained some way below Pfizer's GBP55 final
offer. If the companies don't enter talks by Monday, Pfizer must
wait six months if it wants to return with another bid.
Under the U.K. takeover rules, Pfizer is permitted to change the
terms of its offer in the remaining days: increasing the cash
component from 45%, for example, or adding a contingent-value
right--perhaps a structure in which AstraZeneca could get
additional shares or cash in the event of an experimental drug
being approved. However, it isn't allowed to increase the value of
its total offer above GBP55.
Although it is possible that shareholders might pressure the
AstraZeneca board into engaging with Pfizer, or that Pfizer might
fiddle with components of its offer, "it seems increasingly likely
that there will be no further developments for 3-6 months beyond
the 26 May," analysts at Barclays wrote in a note to clients
Wednesday.
-Jonathan D. Rockoff contributed to this article.
Write to Hester Plumridge at Hester.Plumridge@wsj.com
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