Pfizer-AstraZeneca Takeover Explained
Updated: 4:04pm UK, Tuesday 13 May 2014
Pfizer has expressed an interest in taking over AstraZeneca but what does that mean for Britain and British jobs, and what can the Government do about it?
:: So is there a bid or isn't there?
It's more of a proposal than a bid, really. Pfizer has made it clear it wants to buy British-based AstraZeneca and that it will pay £63bn for it but there's no official bid.
AstraZeneca has made it plain it's not interested, at least not for that amount, and the management haven't even held talks.
:: If it doesn't want to be bought isn't that the end of the story?
No. Pfizer can raise its bid or launch a hostile takeover offer in which it appeals directly to AstraZeneca's shareholders to sell up – which they may do thinking it is a better deal. Kerching.
:: Why does Pfizer want AstraZeneca so much?
It's made it pretty clear that buying AstraZeneca would allow it to be domiciled in the UK so it can pay tax to the British Government.
Corporation tax in the UK is 20% from next year but in the US companies pay 38% of profits in similar taxes.
:: What will it mean for the 6,700 British AstraZeneca staff?
Uncertainty and potentially job losses - Pfizer's boss has admitted this.
There are real fears Pfizer will asset strip AstraZeneca leading to significant redundancies and substantial damage to British scientific research capabilities.
:: But I read Pfizer had guaranteed jobs
No, it has guaranteed it will base 20% of its worldwide research and development staff in Britain – not quite the same thing.
It won't say how many people or where in the UK they will be based, although it has said it will keep AstraZeneca's new Cambridge research facility.
:: Are the guarantees worth the paper they are written on?
In a way yes, in a way no. Under the Takeover Panel rules the guarantee is legally binding for one year although Pfizer insists it will honour its pledges for five years.
However, crucially, there is a clause that says these obligations could be changed "should circumstances significantly change" ie plenty of wriggle room.
In addition it takes 10 years for a drug to get from the lab to the doctor's surgery so a five-year guarantee means little to Britain's scientific researchers.
:: Can't the Government do something?
Ultimately no. The Enterprise Act only allows it to step in under the public interest test ie if it affects national security or financial stability – which it doesn't.
Business Secretary Vince Cable has suggested the law could be changed to include scientific research and development as public interest.
In any event the final say goes to the European Commission and it will make the decision based on competition.
:: And what about competition?
Don't forget while Pfizer is bigger than AstraZeneca, neither are small concerns. A merger will create a huge firm. It will represent the biggest ever takeover of a British firm by a foreign company.
There are very real concerns such big "big pharma" will completely ruin small science research outfits.
Remember AstraZeneca and Pfizer have sites all over this world, this is not just about the UK and US politicians have also raised concerns over jobs.
:: So what are the positives of a takeover?
Well Pfizer will be paying tax to the Government and investing in Britain - all good.
And it says that the combined power of both companies will bring improved treatments for conditions such as cancer, heart disease and diabetes.
In addition, it is investment in science, which is key to the Government's economic strategy.
:: What next?
MPs on House of Commons committees have been hearing from the firms and from unions worried about job cuts but ultimately that is just talk.
Under Takeover Panel rules having indicated its interest on April 26, Pfizer has until May 26 to make an official bid.
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