Pfizer is considering raising its offer for AstraZeneca as it works with its advisers against the clock in a battle where they have just eight days left to move under British takeover rules.
Pfizer still hopes to get AstraZeneca into negotiations before the May 26 deadline for it to make a formal bid or walk away, but has not ruled out a hostile bid in the $100 billion-plus takeover fight, people familiar with the matter said.
"Going hostile is the least favourite option but taking the offer direct to shareholders is a possibility," said one source.
Pfizer made a cash-and-stock takeover approach worth $106 billion or 50 pounds a share on May 2, although its value has since slipped to around 48 pounds, reflecting a fall in Pfizer's shares.
The U.S. group wants to create the world's largest drugs company, with a headquarters in New York but a tax base in Britain, and would much prefer a recommended deal allowing it access to AstraZeneca's books.
But the gap in pricing the company between the two sides is described as "meaningful" and "significant" by sources, suggesting Pfizer will have to make a sizeable jump in price to secure engagement with its rival.
In rejecting Pfizer's May 2 proposal, AstraZeneca argued that the price undervalued it substantially and the offer also exposed shareholders to significant risks, since 68 percent of the transaction would be in Pfizer shares rather than cash.
Chief Executive Pascal Soriot has laid out details of AstraZeneca's promising pipeline of new drugs and argues there is "no inevitability" about the Pfizer deal, although he also acknowledges the board would have to consider a compelling bid.
55 POUNDS "MAGIC NUMBER"
Investors have backed AstraZeneca in rejecting 50 pounds a share but many want it to engage if Pfizer comes back with an improved offer, with two banking sources describing 55 pounds as the "magic number" at which a deal could get done.
Pfizer said last week that working with the UK company's board could help deliver "optimal deal terms" that AstraZeneca could recommend to its shareholders.
There has been a mounting political backlash against the proposed deal in Britain, the United States and Sweden, where AstraZeneca has half its roots.
The Swedish government launched a concerted fightback on Friday against a merger it fears will lead to cuts in science jobs and research, echoing concerns aired by British lawmakers at two parliamentary hearing last week and fears for U.S. jobs in states