AstraZeneca Holder Signals Openness to a Pfizer Bid--Update

By Dow Jones Business News, 
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By Hester Plumridge

LONDON--One of AstraZeneca PLC's top 20 shareholders said Thursday that if Pfizer Inc. takes its offer for the U.K. drug maker hostile, or raises it, there would be "a very good case for engagement."

AstraZeneca's board on Friday rejected a takeover bid of GBP50($84.78) a share from the U.S. giant, valuing AstraZeneca at more than $106 billion, saying it significantly undervalued the company.

The shareholder potentially open to a hostile or higher bid from Pfizer told The Wall Street Journal he was waiting to see if another offer from Pfizer emerged.

"We would like to think [members of the AstraZeneca board] were engaging or being prepared to engage with Pfizer," said the shareholder, who has been in communication with the company this week.

A spokeswoman for AstraZeneca said Thursday the company was continuing to engage with its investors.

AstraZeneca executives were in Sweden Thursday as part of a week of meetings with the company's top 20 shareholders. Swedish investors are estimated to hold just over 10% of AstraZeneca shares, with U.K. investors holding around 40% and U.S. investors holding somewhere between a fifth and half of the company.

Two large investors have come out publicly to support AstraZeneca's rejection of Pfizer's advances so far.

Börje Ekholm, chief executive of Investor AB--AstraZeneca's fourth-largest shareholder, with a 4% stake--said Tuesday he backed AstraZeneca's board in rejecting the bid. Investor AB manages assets on behalf of Sweden's Wallenberg family.

Martin Gilbert, the chief executive of Aberdeen Asset Management, which holds a 2% stake in AstraZeneca, told the BBC in a radio interview Tuesday the company had a good chance of staying independent because of the "enormous credibility" of its management.

Veteran health-care investor Neil Woodford, whose St. James Place U.K. Equity and U.K. High Income funds hold AstraZeneca stock, said in an interview with the U.K.'sDaily Telegraph newspaper Saturday that he believes AstraZeneca has a profitable, viable future as an independent company.

In a Friday interview with The Wall Street Journal, AstraZeneca CEO Pascal Soriot said that no shareholders had asked it to engage when Pfizer made its first offer of GBP46 a share. Mr. Soriot said earlier this week that the feedback he had received from shareholders so far had been "supportive."

Mr. Soriot on Monday set out ambitious new targets for an independent AstraZeneca, including boosting its sales 75% by 2023, with roughly a third coming from drugs it is currently developing. On Thursday, the company announced the start of a late-stage clinical trial for its most important pipeline asset, a cancer drug in the hot new field of immunotherapy.

Analysts at Jefferies called the company's new sales targets "overly optimistic." Dan Mahony, a health-care fund manager at Polar Capital and a small AstraZeneca shareholder, said managers had created some "punchy targets" to live up to should the company stay independent, adding he thought the stock might fall to GBP40 if Pfizer walked away.

Mr. Mahony said he thought that GBP53 to GBP55 was a "fair price" for the business. AstraZeneca stock was trading at GBP46.84 Thursday afternoon in London.

Pfizer Chief Executive Ian Read has said the company is reviewing its options and is hoping AstraZeneca will come back into discussions. Mr. Read has said Pfizer's options could include walking away from a potential deal or even looking for a different one.

The prospect of a foreign takeover of the U.K.'s second-biggest drug maker--and a shining example of the kind of high-skilled science and research jobs the U.K. government wants to increase--has stirred up fierce political debate domestically.

In an open letter published Thursday in the Daily Telegraph, 30 leading U.K. scientists urged the government to protect AstraZeneca, which the letter described as "a thriving, profitable company that does not need any input from Pfizer."

Prime Minister David Cameron hasn't ruled out intervening in any deal and has said he wants more--though unspecified--commitments from Pfizer, which closed a research base and factory in Sandwich, England, in 2011. AstraZeneca employs around 6,700 people in the U.K.

In tandem with its GBP50 offer Friday, Pfizer said it would keep 20% of a combined company's research-and- development workforce in the U.K., and establish an "innovation hub" in Cambridge, England. However, the government would have no means of enforcing the commitments, and Pfizer has only made them for a minimum of five years.

Write to Hester Plumridge at Hester.Plumridge@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires


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  05-08-141201ET
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