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Pfizer and AstraZeneca logos
The UK’s largest drug maker AstraZeneca yesterday rejected a second takeover bid of £60 billion from US rival Pfizer, the first being £58.8 billion and made in January. AstraZeneca said it had rejected the offers on account of their “very significantly” undervaluing the company. Now, we wait to hear whether Pfizer is prepared to sweeten its offer, which must happen within the next 28 days to comply with takeover rules.
So, why might this be a not so wise move for the UK? AstraZeneca is a major player in the government’s drive to revive the economy, currently accounting for 2.3% of the country’s goods exports and employing more than 7,000 staff in the UK. Whilst obviously supported by investors, who drove stock up by 14%, news of the potential takeover has prompted warnings over cuts to jobs and scientific research from political figures such as business secretary Vince Cable as well as trade unions and scientists.
Cable, who has called for increased protection of British companies from foreign takeovers, said he was “…committed to ensuring that the UK continues to be a world-leader in science and pharmaceuticals research and development.”
Given the economic importance of AstraZeneca to the UK, it is understood that Cable could intervene under the Enterprise Act on grounds of public interest once an official offer has been made.
In agreement with Cable, shadow secretary Chuka Umunna said the potential deal should be weighed up according to: “whether it promotes jobs and growth in the UK pharmaceuticals industry, whether it protects Britain’s knowledge, research and skills base and whether it comes with guarantees of long-term investment in the UK.”
Unite, Britain’s biggest trade union, called for guarantees of no job losses and for protection of the UK’s R&D base should a further bid be accepted.
Pfizer envisages the combined company being incorporated in the UK, with shares listed in New York and management in the UK and US. This setup would mean that Pfizer does not have to pay US tax on non-US earnings. US corporation tax is 38%, whereas in the UK it is 21% and will fall to 20% next year.
Commenting on the proposed deal, Pfizer’s Scottish-born chief executive Ian Read said it would eliminate redundant functions and overlapping operations, however he refused to confirm that manufacturing would remain in the UK.
To conclude then, should Pfizer decide to make a further bid to acquire AstraZeneca, it seems likely that a number of negotiations will take place and possibly restrictions imposed to protect the interests and assets of the UK life sciences sector.
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