AZ Electronics shareholder Threadneedle rejects Merck £1.56bn takeover

AZ Electronics shareholder Threadneedle rejects Merck £1.56bn takeover

Threadneedle, one of the UK’s largest asset managers, has increased its stake in AZ Electronic Materials in a move that could block German drugmaker Merck’s £1.56bn proposed takeover of the London-listed specialist chemical company.

Threadneedle, which is one of the top three shareholders in AZ, bought more shares on Thursday and Friday to raise its stake above 11pc. This level of ownership in AZ could now block the 403.5p per share deal.

Simon Brazier, head of UK equity at Threadneedle Investments told The Telegraph, “As a top three shareholder in AZ Electronic Materials, we are disappointed that the board of AZ did not engage with shareholders prior to recommending the takeover offer by Merck.

“We are long term investors and believe the 403.5p per share offer significantly undervalues a business that has innovative, world-leading technology and extremely high levels of market share in the areas within which it operates,” Mr Brazier said.

Merck on Thursday announced a recommended offer for AZ, which supplies materials to make flat screen technology as used in Apple iPads, Samsung and Sony products.

Merck’s chief financial officer yesterday said that it is committed to having 95pc of AZ Electronic shareholder acceptances as a condition to the deal closing.

“Merck is buying a high quality company at the bottom of the cycle,” said analysts at Espirito Santo yesterday. While Merck’s offer was in line with the analyst’s 400p target price range, the company’s future growth prospects could make AZ an attractive target for other buyers, Espirito said.

In 2010, Threadneedle followed a similar strategy during US firm Emerson’s takeover of British power group Chloride. Chloride ended up sweetening its initial takeover offer by 20pc after Threadneedle acquired 10pc of the shares and a bid-battle ensued.

AZ had been trading above 400p at the start of the year before plummeting to a low of 235p in April..

The company said its directors “consider the terms of the offer to be fair and reasonable” and recommended the takeover offer.

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