The U.K. signaled it wants more guarantees from Pfizer Inc., the U.S. drugmaker seeking to acquire AstraZeneca Plc, and held open the possibility of blocking the deal using a “public interest” defense.
Prime Minister David Cameron reiterated today that he wants “more” from the company, while his deputy Nick Clegg said he wants “exacting, binding commitments” rather than “aspirations.” Their comments came after Pfizer yesterday issued a series of videos extolling the scientific benefits of a deal, while downplaying the potential tax advantages.
“I will always stand up for British jobs, British interests, British science, British R&D,” Cameron said in an interview with the BBC’s “Andrew Marr” program. Business secretary Vince Cable “is looking at this issue of public interest defense and he will report back to parliament on that,” he said.
AstraZeneca rejected a bid of about $106 billion from Pfizer earlier this month. Buying the company would give Pfizer a lower tax rate and a portfolio of experimental cancer drugs. Pfizer Chief Executive Officer Ian Read and Pascal Soriot, CEO of London-based AstraZeneca, will testify to U.K. lawmakers this week amid political tension over public-interest issues related to the takeover.
“It really meets the scientific needs,” Read in a video and statement on Pfizer’s website. “It meets needs of efficiency, it meets needs of strengthening our balance sheet and strengthening our fiscal position.”
AstraZeneca counters that progress with its drug development means it’s well placed to grow and deliver for patients and shareholders as an independent company.
Pfizer has pledged to keep 20 percent of research and development jobs in the U.K., continue manufacturing in Britain and press ahead with the development of AstraZeneca’s new headquarters in Cambridge, eastern England.
“Bitter experience in other contexts has taught us about the importance of really pinning these commitments down and not just allowing them to rest as aspirations but to make sure they are exacting, binding commitments,” Clegg told Sky News today. “There are various ways that they could be made more solid and that’s exactly the kind of thing we’re discussing with Pfizer.”
Cable’s examination of how Pfizer’s proposed takeover could be blocked on public-interest grounds includes the possibility of referring the case to the European Commission or proposing a change to the Enterprise Act that would widen the public-interest test for takeovers, a person familiar with discussions in government said on May 9.
The opposition Labour Party, which has criticized the government’s approach to the takeover and accused ministers of being “cheerleaders” for Pfizer, yesterday called for a “stronger public-interest test” to be applied to the deal.
Cameron initially described the assurances on jobs and research investment that Pfizer gave on May 2 as “robust,” before telling parliament on May 7 that the company “must do more.”
“The assurances Pfizer have given ministers are not worth the paper they are written on,” Labour’s business spokesman, Chuka Umunna, said in an e-mailed statement. “Pfizer has since refused to rule out breaking up the AstraZeneca business and selling off parts of it.”
Read may also face government inquiries in the U.S. Pfizer has said it plans to keep the company’s operating headquarters in the U.S., even as its legal address shifts to the U.K. for the lower tax rate.
AstraZeneca shareholders will “get an immediate benefit from the cash that we would pay them,” Read said in a video. “It allows them to participate in a very strong combined company with great cash flows and a great portfolio, and it allows a very efficient allocation of capital.”
“Improving the efficiency of the organization” and the ability to “liberate the balance sheet and tax of the combined companies” are the key reasons for the takeover, Read said. “We liked where their science is being done, which is in the U.K. We liked the complementary nature of the portfolio.”
The approach was, Read said, “a win-win for society, a win-win for shareholders, and a win-win for stakeholders.”