Some Actelion shareholders would be attracted by a $27 billion bid for the Swiss biotech company from Johnson & Johnson, leaving Chief Executive Jean-Paul Clozel with some explaining to do if he turned down an offer around that level.
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One source familiar with the matter has told Reuters the two companies are discussing a bid close to that price, or 250 Swiss francs per share.
That would be a 60 percent premium to Actelion's market value before the companies confirmed last week they were in talks, and tempting for shareholders who would prefer to cash in now rather than bet on an uncertain future.
"If I look at the (drugs) pipeline that Mr. Clozel is excited about, I am perhaps less excited about it and see perhaps a greater risk than reward," said Eleanor Taylor Jolidon, a fund manager at Union Bancaire Privee in Geneva, which is among the top 40 investors in Actelion and holds 0.23 percent of outstanding shares, according to Reuters data.
An offer around 250 francs per share would be "something we could start looking at", Taylor Jolidon said. Should Clozel reject such a price, she added, "he would have a lot of explaining to do."
Clozel has, in the past, guarded Actelion's independence, helped by fellow shareholder Swiss billionaire Rudolf Maag and a supportive Swiss investor base.
In 2011, for example, he fended off a campaign by U.S. hedge fund Elliott Advisors to put the company up for sale. At the time, Elliott suggested Actelion was worth 70 francs per share, about a third of its current price.
And in 2015, Clozel reportedly saw off bid interest from British drugmaker Shire.
The source familiar with the matter said Johnson & Johnson (J&J) had increased its offer - which has not yet been made public - after nearly two months of informal talks.
The main stumbling block is Actelion wants J&J to become a major shareholder in a new entity, while the U.S. firm favors a straightforward takeover, the source added.
Citigroup is advising J&J, while Bank of America is working with Actelion, two sources said.
Both banks and firms have declined to comment on the talks.
Since Actelion's founding in 1997, Clozel and his wife, Chief Scientific Officer Martine Clozel, have built up a world-leading drug portfolio to treat deadly pulmonary arterial hypertension (PAH) and have been lauded for building Europe's biggest biotech from scratch.
They aim to expand in drugs for multiple sclerosis and diarrhea-causing clostridium difficile, but regulatory approvals for those are years away.
The company is also counting on its new PAH treatments Opsumit and Uptravi, which combined are forecast to bring in nearly 4.5 billion francs ($4.4 billion) in annual sales by 2020, according to Reuters data.
The 61-year-old CEO and Maag together own just over 8.5 percent of Actelion stock.
Some investors think J&J has timed its approach well.
"At this juncture and at his age, Mr. Clozel might be willing to consider new opportunities for Actelion," said Alexandre Stucki of AS Investment Management in Geneva, who owns Actelion stock in a portfolio worth "several hundred million Swiss francs".
"If J&J is willing to offer 200 francs or more per share, they probably see good value in the pipeline as well."
Another investor, who declined to be named, said that if J&J offered 250-270 francs per share, Actelion would "have to sell."
At 1405 GMT (09:05 a.m. EDT), the stock was down 2.3 percent at 204.3 francs.
An offer that values the company at nearly $10 billion more than it was worth just last week could cause even Clozel loyalists to jump ship, given questions about its pipeline.
"At the right price, Actelion management might have to engage with a deal ��� or will face having to justify to shareholders why the long-term direction is more valuable in their hands," Barclays analyst Olivia Capra wrote.
($1 = 1.0151 Swiss francs)
(Additional reporting by Ben Hirschler, Pamela Barbaglia and Ransdell Pierson; Editing by Mark Potter)