By Mark Kleinman, City Editor
AstraZeneca should link future executive pay to the price that its board signalled it would be willing to sell the company for, a leading shareholder has told it in a move which intensifies the pressure on it to justify the rejection of a string of takeover bids.
Sky News has learnt that in a letter sent to the British pharmaceuticals group last week, Legal & General Investment Management (LGIM) said long-term share awards should pay out in full only if AstraZeneca's share price reaches £58.85.
That was the level at which the company has said it would be willing to discuss a takeover by Pfizer, its US rival.
Last weekend, Pfizer offered £55-a-share for AstraZeneca, valuing it at £69bn, which was rejected by its prospective merger partner.
It emerged on Wednesday that LGIM was among AstraZeneca shareholders which were disappointed by the decision to spurn Pfizer's offer, which is expected to lapse on Monday when a deadline expires for it to lodge a formal bid.
Sources said that LGIM, which owns approximately 3.5% of AstraZeneca and is its sixth-largest investor, had also called for executives' pay to be linked to a $45bn (£26.7bn) revenue forecast which was outlined by the drugs-maker's chief executive, Pascal Soriot, as part of its defence against Pfizer's approach.
LGIM's demand goes further than those of other AstraZeneca shareholders, a number of which have called for pay to be partly-determined by the shares hitting £55, the level of the most recent Pfizer offer.
"If the remuneration committee of AstraZeneca – and, indeed, any company rejecting an offer in favour of long-term independence – was to recalibrate any current and future incentives to vest only at the level of the spurned takeover, it would provide comfort to shareholders that if things do not play out as the management envisage, the executives have shared in the pain felt by shareholders at the lost opportunity," Richard Buxton, head of UK equities at Old Mutual Global Investors, wrote in a letter to the Financial Times.
AstraZeneca investors are divided about the board's handling of the bid, with its shares closing on Friday at £43.28.
Last week, Schroders issued a statement criticising the actions of both companies, while Sky News revealed that BlackRock, AstraZeneca's biggest shareholder, wants it to invite Pfizer to reopen merger talks.
Those which have backed the board's stance that AstraZeneca would be stronger as a standalone business include Fidelity Investments, M&G Investments and Woodford Investment Management.
Under rules supervised by the City takeover watchdog, Pfizer will be prohibited from making a further offer for AstraZeneca for six months if it abandons its interest. It has said it will not make a hostile bid by going directly to AstraZeneca's shareholders.
However, the British group, which will set out further details of its cancer drug pipeline at a key industry conference in the US this week, could approach Pfizer to enter talks in three months' time.
Pfizer's interest in AstraZeneca has sparked a row in Westminster about the US company's track record in research and development.
LGIM, AstraZeneca and Pfizer all declined to comment.
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