Government pledges ‘hard negotiation’ with Pfizer
The UK government says it ready for “hard negotiation” with Pfizer in order to gain guarantees about investment in the country, should its proposed takeover of AstraZeneca go through.
On Saturday the Chancellor George Osborne told BBC radio: “I think it would be extraordinary not to engage with AstraZeneca or Pfizer,” adding that the UK’s longstanding approach of having an ‘open economy’ had brought benefits.
He said the UK had benefited “enormously” from past investment by foreign companies, such as Nissan and Tata Motors in the car industry, and pointed out that AstraZeneca was itself a product of a foreign merger.
Osborne’s tough talking has been necessary because of widespread fears that Pfizer isn’t interested in a long-term investment in the country. The deal would be the largest foreign takeover of a British company. While some observers are welcoming Pfizer’s interest, many more are wary of Pfizer’s motives.
Critics say the main reason for the proposed merger are Pfizer’s plans to redomicile to the UK to exploit the country’s low corporate tax rate, and to avoid US taxes on its foreign earnings.
Pfizer saw a second takeover offer of $106 billion (£63 billion) rejected by AstraZeneca last week, but a new and improved offer is expected shortly. Once the price is raised, such deals are almost always completed, though some AstraZeneca shareholders are currently supporting the UK company’s bid for continued independence.
“We are an open economy, we benefit from that. But our national economic interest when it comes to a very big takeover like this is who’s going to be providing the science and the jobs and the manufacturing,” Osborne said.
A history of megamergers
The move for AstraZeneca reflects a long-term strategy for Pfizer. It has become the world’s biggest pharmaceutical company via a string of ‘megamergers’, buying up Warner-Lambert in 2000, Pharmacia in 2003 and Wyeth in 2009. Observers point to the company’s single-minded pursuit of cost savings following these mergers – cutting the vast majority of jobs and research sites it has acquired along the way.
Pfizer has pledged to complete AstraZeneca’s new research centre in Cambridge, retain a factory in Macclesfield near Manchester and put 20% of its research staff in Britain if the deal goes ahead.
But it is clear that these do not represent truly long-term commitments to the UK, with Pfizer admitting that if circumstances changed “significantly”, it could not honour these pledges.
The political reception of the bid has been complicated by two-party nature of the coalition government. Deputy Prime Minister and Liberal Democrat leader Nick Clegg spoke to Pfizer on Friday calling for firmer commitments.
“Pfizer have given assurances about the jobs they’d create in Britain and the science they’d do in Britain. We have to make sure those are real promises that we can hold them to,” Osborne said.
Osborne said he and chief civil servant Cabinet Secretary Jeremy Heywood are in close communication with both of the companies, and Osborne said he was prepared to engage in ‘hard negotiation’ on the specifics of any proposals.
Opposition from UK science community
The deal has attracted the attention of the UK’s science community, and has been exceptional in creating a virtually unanimous opposition to the takeover.
At the same time, some business leaders are concerned by the level of political interference in the negotiations.
Simon Walker, director general of the Institute of Directors, wrote in an opinion piece in the Times newspaper on Saturday that intervention by the government would “send the worst possible signal to global business and repudiate a three-decade commitment to a free and open economy.”
The UK government has not ruled out the idea of examining the Pfizer takeover to a formal “public interest test”, although UK law does not, in theory, allow the government to intervene in this instance. Legal experts say the European Commission would also be likely to veto any attempted intervention.
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