Pfizer and AstraZeneca set for parliamentary show down
Pfizer chief executive Ian Read is to go head-to-head with AstraZeneca’s Pascal Soriot in two parliamentary hearings to argue for the future of the UK-based company.
The two CEOs have been called to give evidence to the MPs’ committees in Westminster on Tuesday and Wednesday, as debate around the proposed mega-merger reaches fever pitch.
Pfizer’s Read will seek to persuade the MPs that the planned takeover of AstraZeneca will be good for the UK, as well as good for Pfizer. Likewise, AstraZeneca’s Pascal Soriot is expected to maintain his stance that his company can thrive and contribute more to the UK as a standalone company.
While the UK has traditionally kept out of mergers involving major UK companies, the importance of AstraZeneca to the UK life sciences sector has prompted direct involvement from the Prime Minister, business minister Vince Cable, the opposition Labour party and MPs.
Pfizer’s deal is based around it redomiciling to the UK, a move which will help it paying heavy US taxes on its foreign earnings. However many critics fear this is the main aim of the takeover, and that Pfizer won’t sustain investment in UK research and development in the long term.
Last week Pfizer’s leadership team had meetings with the UK government, and offered reassurances on investment in UK R&D. The company said it would retain at least 20% of its research and development workforce in the UK if the merger were to go ahead – but only guaranteed its investment for a five year period.
Pfizer’s track record in megamergers over the last decade has shown the company has rapidly cut back R&D headcount, a point raised by many commentators in the UK life sciences field.
These fears informed the stance of Liberal Democrat business secretary Vince Cable, who has refused to rule out intervening to block a bid.
Speaking yesterday in Parliament, Prime Minister David Cameron hardened his stance on the proposed merger, saying he wanted further reassurances.
“Let me be absolutely clear, I’m not satisfied, I want more,” Mr Cameron told Parliament.
“But the way to get more is to engage, not to stand up and play party politics.” He added: “The more we can do to strengthen the assurances the better.”
He said he agreed with the position taken by Vince Cable on not ruling out intervention.
Mr Cameron said: “The most important intervention we can make is to back British jobs, British science, British R&D, British medicines and British technology.”
“There is more inward investment into Britain today than the rest of the European Union combined. Don’t let’s put that at risk,” he concluded.
The government does, in theory, have the power to block the merger, using ‘public interest’ powers, but it will be reluctant to use them and be seen to be interfering in the market. Mr Cable also stressed that the UK was working within strict European ‘legal constraints’ in the field.
MPs on the Business, Innovation and Skills Committee will be taking evidence on Pfizer’s proposed takeover of AstraZeneca on Tuesday, and will also hear from trade unions, who are likely to express fears about UK job cuts.
Then on the following day, the chief executives will be back to talk to Science and Technology Committee, with the companies’ respective heads of R&D also giving evidence. This second session will conclude with MPs firing questions at David Willetts, the minister for Universities and Science.
These committees will then make their own recommendations, although the government is not obliged to follow this advice.
The meetings, which will be open to the public and broadcast live on the internet, will however be a very significant moment in the debate about AstraZeneca’s future. Some observers say AstraZeneca is merely following the usual pattern of companies pursued in M&A activity, with the aim of raising the value of the final bid.
A number of key shareholders have expressed their doubts about Pfizer’s intentions, however, meaning that the takeover is not yet a foregone conclusion.
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