Sweden Urges Pfizer to Abandon AstraZeneca Takeover AmbitionJohan Carlstrom and Niklas Magnusson
Sweden’s Finance Minister Anders Borg is urging Pfizer Inc. to give up its efforts to take over drugmaker AstraZeneca Plc, arguing the deal would destroy research and development jobs in Europe.
Borg, who is battling rising unemployment in Sweden ahead of September elections, criticized the U.S. firm for adopting what he described as an “aggressive strategy” to buy AstraZeneca, which employs 5,900 people in Sweden.
“It would be very wise of Pfizer to consider to withdraw from this process,” he said yesterday in an interview in Stockholm.
Borg last week urged shareholders to reject Pfizer’s bid, which he characterized as a “hostile process” in part aimed at cutting Pfizer’s tax burden. AstraZeneca, formed in a 1999 merger between Astra AB and Zeneca Plc, yesterday rejected a sweetened $117 billion offer from Pfizer.
The takeover bid is likely to fail because British law prohibits the U.S. firm from improving its offer after declaring it final, according to people familiar with the transaction. Pfizer is expected to announce that it will not make a formal bid by May 26, which is the deadline for the U.S. firm to make an official offer, one of the people said.
“It’s a very aggressive and raw strategy that Pfizer has and I think that undermines Pfizer’s credibility in the long-term,” Borg said. “It may create risks for them. We’re very worried about what this will mean to research and development in Europe, in the U.K. and Sweden.”
Sweden’s enterprise minister, Annie Loof, underscored the government’s opposition to the deal today, arguing AstraZeneca can function best as an independent company.
Though the “last word has not yet been said” on the proposed transaction, Loof said she expects Pfizer to live up to its promise that its latest bid was final.
Borg is lashing out at Pfizer in defense of Swedish jobs as the government of Prime Minister Fredrik Reinfeldt lags behind the Social Democrat-led opposition in most polls. A report showed yesterday that joblessness in the largest Nordic economy unexpectedly rose 0.1 point to 8.7 percent in April, when economists surveyed by Bloomberg had foreseen a decline. The news sent the krona plunging as much as 0.8 percent to its weakest against the euro in more than a month.
At the same time, the workforce rose 56,000 people from a year earlier, Statistics Sweden estimates.
“It’s a mixed picture,” Borg said. “Things look strong on the employment side of things; there is a high number of vacancies and unemployment is moving sideways.”
Sweden, a AAA-rated nation that credit derivatives suggest is a safer bet than Germany, has weathered the global financial crisis better than most. Its economy will grow 2.8 percent this year, more than twice the pace in the euro area, the European Commission estimates. Swedish public debt is about 40 percent of gross domestic product, less than half the euro-zone average.
Yet the nation, home to corporate giants including furniture maker Ikea, appliance maker Electrolux AB and fashion retailer Hennes & Mauritz AB, has struggled to bring down unemployment. Sweden’s jobless rate is 2 1/2 times that in neighboring Norway. It’s even higher than in Denmark, where a 2008 housing crash has suppressed consumer demand and kept GDP growth at about half the rate in Sweden.
Borg, who worked as an economist at Sweden’s central bank and commercial lenders SEB AB and ABN Amro before coming to the finance ministry, is struggling to persuade voters he can create more jobs as the opposition pledges higher spending targeting employment growth.
According to Svenska Handelsbanken AB, Sweden’s second-biggest mortgage lender, the nation’s labor market won’t show clear signs of improvement until the third quarter, just as voters decide on their next government.
“We think it’s likely that the labor market should pick up speed rather late, in response to high GDP growth,” Anders Brunstedt, an analyst at Handelsbanken in Stockholm, wrote yesterday in a note. “A lot of businesses should cope well with existing personnel, we assume. And when the labor market starts to strengthen, we don’t expect any really rapid improvement.”
Borg says people need to focus on employment growth, when assessing Sweden’s economic health.
“A lot of people have entered the labor market,” he said. “It ought to pave the way for somewhat better growth in the years ahead without creating risks for inflation.”
He also blames economic weakness abroad for his nation’s joblessness. Sweden, which generates half its GDP from exports, relies on international trade to support its biggest employers.
“We need a strong recovery in the world economy,” he said. “Sweden can’t alone generate a better labor market.”
Meanwhile the government may get some help from the central bank, which most economists predict will cut its benchmark repo rate a quarter of a percentage point to 0.5 percent in July. Yesterday’s jobless data underlined that likelihood, Danske Bank A/S and Nordea Bank AB said.
“The Riksbank sees unemployment at 8 percent on average in the second quarter,” Torbjoern Isaksson, chief analyst at Nordea, said in a note. “Thus, unemployment is above the Riksbank’s forecast, supporting the view of a rate cut in July.”