Pfizer CEO Faces U.K. Panel as Resistance to Bid HardensRobert Hutton, Kitty Donaldson and Thomas Penny
Pfizer Inc. Chief Executive Officer Ian Read faces heightened public scrutiny of his bid for AstraZeneca Plc this week when he’ll be questioned by lawmakers on his commitment to the U.K. in hearings broadcast live.
Read has been summoned by separate parliamentary committees to testify on the U.S. company’s offer of about $106 billion for London-based AstraZeneca, the biggest takeover bid in U.K. history. He and AstraZeneca CEO Pascal Soriot are scheduled to appear before the Business, Innovation and Skills Committee tomorrow and the Science and Technology Committee on May 14.
The hearings in London provide a first opportunity for lawmakers to question the pharmaceutical executives amid growing public and political concern that a takeover would mean job losses and cuts to research. As executives from Rupert Murdoch to Robert Diamond have learned, lawmakers acting in the name of British taxpayers can force company changes to assuage public concerns.
“The entire political class and media will be spending a couple of hours listening to Pfizer’s business and intellectual case” for the takeover, said Richard Berry, managing director of Democratic Audit, a charity that has studied the work of parliamentary committees. “Sessions where people get a grilling get a lot of attention and I’m sure the media will highlight the most aggressive part.”
Read may have pre-empted some of the questions he is likely to face with videos posted on Pfizer’s website over the weekend in which he outlined the case for the bid, stressing his company’s commitment to research and explaining its decision to shutter a plant in Sandwich, England, in 2011. Pfizer’s commitment to the new AstraZeneca headquarters being built in Cambridge, eastern England, fits the company’s record of bringing together scientists at its research hub in the U.S., Read said.
“In the U.K. I see great similarities with Cambridge, Massachusetts, where you have this hub of innovation, this hub of young scientists,” he said. “The strategy to build a center in Cambridge in fact is in line with our strategy as we’ve shown by what we’ve done in Massachusetts.”
When Read first approached ministers after announcing the bid, Conservatives including Chancellor of the Exchequer George Osborne welcomed it as a vote of confidence in the U.K. Since then, ministers have grown more cautious, demanding assurances about jobs and research spending. According to one person familiar with the company’s plans, Pfizer won’t proceed with the bid if the U.K. government is hostile.
“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,” Deputy Prime Minister Nick Clegg said in an interview with Sky News broadcast yesterday. “There are various ways that they could be made more solid and that’s exactly the kind of thing we’re discussing with Pfizer.”
The most hostile questioning may come from members of the opposition Labour Party, whose leader Ed Miliband has accused Prime Minister David Cameron of being a cheerleader for the takeover. Conservatives will also want to be seen to be asking tough questions to demonstrate they are pursuing due diligence.
“Frankly, we have not seen any guarantees from Pfizer that they have an investment plan that is equal to what AstraZeneca are putting into the science base over the next 10 years,” William Bain, a Labour lawmaker on the Business Committee, said in an interview. “Pfizer does have a record of launching takeovers for other pharmaceutical companies and then seeing a reduction in investment in research and development.”
Tomorrow’s session will begin at 9:30 a.m. in London with evidence from union officials. At 10 a.m., Read will be joined by Frank D’Amelio, the company’s chief financial officer, and Jonathan Emms, its U.K. managing director. Their testimony is scheduled to end at 11:15 a.m., when Soriot, flanked by Mene Pangalos, AstraZeneca’s executive vice president, and Ian Brimicombe, vice president in charge of corporate finance, will make the case against the takeover.
“The main issue is to understand what Pfizer’s commitments to the U.K. are and how binding they are,” Julian Huppert, a lawmaker who represents Cambridge, said in an interview. “The deal is driven by their desire to avoid paying tax in the U.S.”
The British government’s “patent box” allows companies to pay reduced tax on products spun out of research done in the U.K. For Huppert, it makes Pfizer’s attachment to Britain shaky.
Pfizer is also facing political pressure in the U.S., where the New York-based company has said it plans to keep its operating headquarters even as it moves its legal address to the U.K. for a lower tax rate.
In the videos at the weekend, Read sought to shift the emphasis away from tax and onto the business case for the takeover, which AstraZeneca’s board has rejected.
“We liked where their science is being done, which is in the U.K. We liked the complementary nature of the portfolio,” he said. The approach was, he said, “a win-win for society, a win-win for shareholders, and a win-win for stakeholders.”
British parliamentary committees, originally introduced to scrutinize the work of government, have become increasingly willing to intervene in matters of more general interest.
In 2012, the Treasury Committee summoned Diamond, then CEO of Barclays Plc, to explain the Libor-rigging scandal. He resigned before he got there, despite investor support, after politicians on all sides made him a target.
Murdoch, chairman of News Corp., made it through three hours of testimony to parliament’s culture committee on the phone-hacking scandal in 2011. He emerged unscathed barring a foam-pie assault by a member of the public after telling members that his appearance was “the most humble day of my life.” His son James wasn’t so lucky, with his account of events disputed by two former executives.
The first sign of whether the U.K. government’s view on Pfizer and AstraZeneca has shifted as a result of the testimony will come at 1 p.m. tomorrow, when Business Secretary Vince Cable responds.
Cable has been examining how Pfizer’s proposed takeover could be blocked on public-interest grounds, including 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.
“I will do whatever is right for Britain, I will always stand up for British jobs, British interests, British science, British R&D,” Cameron said when asked on BBC TV yesterday about toughening up the law on takeovers. “But when we think of that, it is important to make the point that Britain benefits massively by being an economy that’s open to overseas investment.”