In an April 12 special meeting, shareholders will vote on the merger between biotech Chiron (NASDAQ:CHIR) and pharmaceutical giant Novartis (NYSE:NVS). As the date draws closer, dissident shareholders have been ratcheting up the noise to defeat the buyout.

Novartis already owns 42% of Chiron, the manufacturer of the Fluvirin flu vaccine. Now it wants to buy the remaining shares at $45 apiece. Standing in its way: Legg Mason (NYSE:LM) affiliate fund CAM North America, the largest non-Novartis shareholder, and hedge fund ValueActCapital, with its own 9% stake. ValueAct alleges that Novartis used inside information to make a low-ball bid for Chiron, and it's vowed to vote against the merger.

Instead, ValueAct has proposed that Chiron buy 47 million of its shares from Novartis at $45 a share. If Novartis considers $45 apiece a fair price for Chiron shares, ValueAct reasons that it should be as willing to sell those shares as it is to buy them. Buying back that chunk of shares should reduce Novartis' stake in Chiron below 20%. That would allow the smaller company to replace two of the three Novartis-affiliated directors on its board with independent candidates, weakening Novartis' considerable influence over extraordinary situations such as this merger deal.

ValueAct's opposition has become more strident as the meeting date approaches. It now says that if Chiron CEO Howard Pien supports the merger at the current price, and if the deal subsequently falls through, ValueAct will assume he's been "co-opted" by Novartis and seek to replace him with a more independent CEO.

When Novartis made its initial offer, Chiron was trading at around $36 because of the debacle in its flu vaccine division. ValueAct alleges that Novartis knew before other investors did that the FDA planned to approve Chiron's return to the vaccine market; it made a $40-per-share offer on the same day the FDA issued its letter. Naturally, the stock jumped, but Novartis based its bid on the previous closing price. Even though Chiron faces greater competition from GlaxoSmithKline (NYSE:GSK), Sanofi-Aventis (NYSE:SFY), and MedImmune (NASDAQ:MEDI) than it did before, its reentry to the flu vaccine market lets it recoup much of its lost revenue.

Since then, Chiron's stock has strangely traded above the sweetened $45 offer. Usually, stock prices rise to meet or slightly trail the offer price, unless there is the potential for another offer to be made. In Chiron's case, Novartis' hefty ownership position makes a competing bid unlikely. Thus, ValueAct alleges that the larger pharmaceutical knew it could come in with a low offer, yet claim that it was offering a 23% premium.

ValueAct says that Chiron's market price has floated above Novartis' offer because shareholders realize that Chiron's value is actually far greater. By simply applying the biotech's historical P/E of 25, ValueAct believes that Chiron should be worth as much as $120 per share in 2010. If discounted back to today, the fund believes that valuation makes Novartis' $45 offer an appropriate starting point, not a final bid.

Chiron added one more twist to the story today, announcing a recall from developing markets of vaccines with a high rate of side effects. Chiron also revised 2005 earnings guidance down $0.03, to $0.94 per share.

With the stakes high and less than a month to go, it will be interesting to see whether the shareholders not beholden to Novartis can mount a strong enough challenge to force the pharmaceutical to sip some bitter medicine.

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Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. GlaxoSmithKline is a Motley Fool Income Investor pick. The Motley Fool has a disclosure policy.