Pfizer poised to sweeten offer for AstraZeneca
The Pfizer Inc. company logo, right, and the AstraZeneca Plc company logo, are seen on boxes of pharmaceutical products produced by the drug makers in this arranged photograph taken in London, U.K., on Friday, May 2, 2014. AstraZeneca Plc rejected Pfizer Inc.'s sweetened takeover proposal, saying the 63.1 billion-pound ($106.5 billion) offer fails to recognize the value of the promising experimental medicines under development by the U.K.'s second-biggest drugmaker. Photographer: Chris Ratcliffe/Bloomberg©Bloomberg
AstraZeneca is braced for a fresh approach from Pfizer as the UK government holds talks with Brussels about its options for intervening in what would be the biggest foreign takeover of a British company.
Pfizer was weighing its next move over the weekend as the clock ticked towards the May 26 deadline for the US drugmaker to sweeten its £63bn offer or walk away under UK takeover rules.
People close to both companies said they expected Pfizer, maker of the Lipitor cholesterol treatment and Viagra anti-impotence pill, to improve on the £50-per-share proposal rebuffed by AstraZeneca earlier this month.
Big shareholders and analysts have said an offer between £53 and £55 per share is likely to be needed to bring AstraZeneca to the table, with a higher portion of cash than the two-thirds paper proposal made on May 2.
Pfizer has not ruled out making a hostile bid but people close to the US company say it still hopes to persuade its UK rival to enter talks over a friendly deal.
People close to AstraZeneca said on Sunday that, while the UK-listed drugmaker would consider a higher offer, it continued to believe the company was best off independent.
Meanwhile, UK government officials have held informal early-stage discussions with the European Commission to establish what powers the UK would have should ministers attempt to intervene, according to people familiar with the talks.
David Cameron is under pressure from the opposition Labour party to subject any deal to a “public interest test” amid concerns over what impact a US takeover of AstraZeneca would mean for Britain’s life sciences sector.
While the prime minister has made clear his reluctance to do anything that undermines the UK’s reputation for openness to foreign investment, he has given the go-ahead for officials to explore the government’s options.
Under EU law, ministers can intervene in big mergers on public interest grounds but ultimately the move needs approval from Brussels. Three reasons to intervene are specifically mentioned in EU regulations: public security, media plurality and financial stability.
The UK has in the past intervened in a water merger citing public security concerns and officials are taking advice on whether it could do the same in the pharmaceuticals sector.
An alternative is to ask Brussels for permission to intervene on other grounds, such as protecting the R&D base. The commission, which has the job of guarding against protectionism, has never accepted such a request and people familiar with the process say the bar is “very high”.
British officials are examining whether legally binding commitments from Pfizer on research and investment could be attached to merger approval from the commission.
Ministers are not yet involved in any discussions with Brussels. Vince Cable, business secretary, told MPs last week that the “mere fact that the government would enter into a conversation with the commission is potentially highly significant in terms of the bid and its effect on the shareholders”.
Business leaders have warned ministers against any move that creates the impression the UK is resorting to “protectionism”.
Katja Hall, the CBI’s new deputy director-general, said executives wanted the government to protect Britain’s science base but were nervous about Labour’s more hardline position. “We’ve got to make sure that any commitments [from Pfizer] are made to stick,” Ms Hall said. “But the concern is if there is any impression given that the UK wasn’t open for business.
“The UK has always been a trading nation and ultimately we will be successful by being able to export goods and services to other parts of the world and by making sure we get investment into the UK. We mustn’t resort to protectionism.”