Pfizer cautions UK ministers not to block £60bn AstraZeneca bid
Pfizer has thrown down a gauntlet to the British government by warning that it would be a mistake for ministers to block its £60bn takeover bid for AstraZeneca, as the US drugmaker steps up its pursuit of its UK rival.
“The UK faces a choice,” Ian Read, chairman and chief executive of Pfizer, told the Financial Times. “Do they focus on ensuring there is an educated workforce with the right incentives in place to attract investment or do they pick winners and losers.”
Mr Read praised the UK government for creating an attractive business environment that made Pfizer want to invest in the UK and urged ministers to keep faith in the free market to promote the country’s life sciences industry.
The Pfizer chief executive flew into London on Tuesday with his top management for talks with government ministers and AstraZeneca investors to convince them to support the biggest ever foreign takeover of a UK company.
However, the deal has prompted fears over jobs and the UK’s science base among some politicians. The company employs 7,000 people in the UK and supports thousands more jobs – many of them high-value – in an industry that the government sees as playing a key role in supporting balanced long-term economic growth.
George Osborne, chancellor, welcomed Pfizer’s proposed takeover as a big vote of confidence in Britain and its low corporate tax regime, but warned Mr Read last night that the takeover would come under intense scrutiny.
Vince Cable, business secretary, is said to be especially sceptical about claims that the bid is motivated by a desire to bolster Britain’s R&D base after Pfizer cut more than 1,500 jobs at its Sandwich facility in 2011. Both Mr Osborne and Mr Cable are insisting the deal must preserve jobs and research in the UK.
“I want to see more British science,” Mr Osborne said. “AstraZeneca have been doing a lot of that great science. Pfizer said very encouraging things about the UK as a place to do business and a place to do good science.”
Ministers have limited legal powers to block a merger, but have a number of “soft options” available if a Pfizer were to embark on an asset stripping exercise: the government provides extensive support for the sector through the tax system and direct taxpayer funding.
Mr Read refused to issue any commitments over UK jobs and investment during his round of meetings in London, arguing it was impossible to do so unless AstraZeneca agreed to sit down to discuss how a deal could work.
But he insisted the merged company would maintain a “significant” management and scientific presence in the UK as well as shifting its tax domicile to the country to escape the 38 per cent US tax rate on repatriated overseas profits.
Mr Read denied that significant tax savings were the primary motivation for the deal, pointing instead to the potential to create a “US-UK powerhouse” in medical science. But he acknowledged the importance of the “patent box” tax break on income from intellectual property, introduced by Mr Osborne, in encouraging Pfizer to make its move.
“The UK has created an environment you need to win in life sciences,” he said. “If you want to play in the long term you need to let these kind of deals go through.”
After days of rumours, Pfizer confirmed on Monday that it had approached AstraZeneca in January with an informal £46.61 per share offer, valuing the company at just under £59bn.
On Tuesday the stock fell slightly to £46.26 as AstraZeneca reiterated its stance that the January offer “significant undervalued” the company and that no talks would take place in the absence of a much improved bid. Pfizer has until May 26 to make a firm offer or walk away under “put up or shut up” takeover rules.
People close to AstraZeneca insisted that, while it would keep strategic options open, there would be no rush to explore alternative deals mooted by analysts – such as a merger of equals with another drugmaker.
“We’re keeping cool heads. Absent a significantly improved offer there is nothing to discuss. This is a company that feels very good about its strategy and does not see the need for a partner.”