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Have AstraZeneca's shareholders blown it?

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Have AstraZeneca's shareholders blown it?

In a new twist to this week's 'will they, won't they' saga, AstraZeneca rejected Pfiser's fourth and ‘final offer’.

The healthcare group turned down a final offer for the company by rival Pfizer saying that the value of £55 per share, or £69.4 billion, ‘undervalues the company and its attractive prospects’.

Following the rejection of the mixed cash and equity offer, shares in AstraZeneca dipped 11% on Monday and fund managers appear to have grown sceptical.

Peter Garnry, head of equity strategy at Saxo Bank, put it simply: 'AstraZeneca shareholders blew it.'

'[The final offer] was reportedly too low for AstraZeneca, which had previously stated that its board would only consider an offer of at least £58.85 per share.'

Under British law, Pfizer has until 26 May to persuade AstraZeneca to entertain their final offer; otherwise the company will be prohibited from making another proposal for six months.

Garnry believes it is during this period that AstraZeneca 'would be under enormous pressure from shareholders to prove itself and its decision to reject Pfizer’s latest offer'.

Pressure on Astra ahead of deadline

Citywire + rated Neil Veitch and James Cooke, managers of the SVM World Equity fund, say the £55 per share bid 'looked a fair offer' .

While the pair reiterate the need to reach an agreement before the UK takeover law deadline, Cooke also reminded investors Pfizer has stated it would not pursue a hostile offer targeted towards AstraZeneca’s shareholders to secure a deal.

'Until then there is a chance that major AstraZeneca shareholders, many of whom Pfizer are said to have spoken to during the process so far, could encourage the AstraZeneca board to reconsider.’

While analysts at Citigroup and Deutsche Bank reiterated a 'buy'  and 'hold' rating on shares of AstraZeneca respectively last week, the latest recommendation came from Credit Suisse before the weekend, with a 'neutral rating. Societe Generale also issued a 'hold' rating on the stock.

Still, closing prices on Monday showed AstraZeneca was down 11.11% on the day at £41.21 - far from the £55 offer - down as much as 14.5% earlier. Meanwhile, the stock is still up 18.11% over one year versus 1.11% gain on FTSE 100.

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Neil Veitch
Neil Veitch
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