Schroders, Fidelity reveal investor split as Astra rejects Pfizer

LONDON Tue May 20, 2014 3:50pm EDT

A sign is seen at an AstraZeneca site in Macclesfield, central England May 19, 2014. REUTERS/Phil Noble

A sign is seen at an AstraZeneca site in Macclesfield, central England May 19, 2014.

Credit: Reuters/Phil Noble

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LONDON (Reuters) - Some leading AstraZeneca Plc shareholders were at odds over whether the British drugmaker made the right decision in rejecting Pfizer Inc's final $118 billion bid to buy the company.

Schroder Investment Management Ltd (SDR.L), AstraZeneca's (AZN.L) 12th-biggest shareholder, urged the drugmaker on Tuesday to restart takeover talks with Pfizer (PFE.N) while Fidelity Worldwide Investment (UK) Ltd, holder of the 18th largest stake in Astra, backed the British company's stance.

The division highlighted a split among investors following the collapse of a potential transaction, leaving many shareholders frustrated at missing out on a big windfall.

Schroders said it was disappointed with "the quick rejection by the AstraZeneca board" of an improved 55 pounds-a-share offer and the decision by Pfizer to "draw a premature end to these negotiations by calling their latest proposal final."

"Given the increase in the offer we would encourage the AstraZeneca management to recommence their engagement with Pfizer, and subsequently their shareholders," the fund manager, which owns 2 percent of AstraZeneca, said.

Schroders' comments echoed those of other shareholders, including Jupiter Asset Management Ltd (JUP.L), which were dismayed at AstraZeneca's rejection of Pfizer's offer on Monday.

Astra said that under UK takeover rules, there could be no further talks with Pfizer and that the U.S. drugmaker could not privately or publicly even suggest it was willing to raise its "final" rejected bid prior to a May 26 deadline unless a third party made a higher offer.

"This restriction that prevents further negotiation on value is a consequence of Pfizer's actions," AstraZeneca Chairman Leif Johansson said in a statement.

Pfizer declined to comment on the AstraZeneca statement. The largest U.S. drugmaker had previously said it was now up to Astra shareholders to urge the board to reconsider Pfizer's final offer.

The deal would have created the world's biggest drugs group. Instead, AstraZeneca's rejection triggered the biggest intra-day slump in its shares since the creation of the company through a merger of British and Swedish businesses in 1999.

The anger, however, was not universal.

"I think Astra did the right thing. I don't think that Pfizer was a suitable partner," said Dominic Rossi, London-based Fidelity's global chief investment officer for equities, arguing the deal was motivated by Pfizer's desire to cut taxes.

"The Astra board has taken a very difficult decision. They understood in rejecting the offer they would be criticized by some shareholders. We will now have to wait two to three years to see whether they were right. With a little luck they could well be." Fidelity owns 1.2 percent of AstraZeneca, according to Thomson Reuters data.

Anne Richards, chief investment officer at Aberdeen Asset Management which holds 2.4 percent of the British drugmaker, also said Pfizer's offer "certainly wasn't a knock-out."

Veteran fund manager Neil Woodford, who controls AstraZeneca shares in funds he runs for wealth manager St James's Place (SJP.L), said he was "relieved that AstraZeneca appears to have retained its independence."

Strict British takeover rules mean the angry stalemate between AstraZeneca and Pfizer is almost certain to end with no deal, unless AstraZeneca's board did a U-turn and recommended Pfizer's final offer.

AstraZeneca shares ended 0.5 percent higher in London, while their shares on the New York Stock Exchange rose 1.7 percent shortly before the close of trading. Pfizer shares were flat at $29.28, also on the NYSE.

(Additional reporting by Ben Hirschler in Lodon and Bill Berkrot in New York; Editing by Erica Billingham and Richard Chang)

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