Pfizer chief executive Ian Read has sought to reassure UK Prime Minister David Cameron that a takeover of AstraZeneca (AZ) would not lead to the loss of UK jobs and closure of facilities.
The company has also tried to woo AZ with a higher takeover offer, raising its bid from £46.61 to £50.00 per share, and says it would be committed to establishing the merged company’s corporate and tax residence in England. The new offer values the UK pharma giant at around £63bn ($106bn).
Read also promised to continue AZ’s ambitious plans to build a major R&D campus in Cambridge and said the combined firm would employ 20 per cent of its R&D workforce in the country, although he also notes that the commitments are made for “a minimum of five years”.
AZ currently employs around 6,700 people in the UK, while Pfizer has around 2,500 staff working there.
Pfizer would retain AZ’s manufacturing base in Macclesfield and would also consider building other production facilities, depending on the timing of the UK’s patent box proposals, which will introduce reduced tax on income derived from patents held in the UK, he added. The patent box has also been a factor in recent investment decisions by GlaxoSmithKline.
“We believe the industrial logic for a combination between Pfizer and AZ is compelling,” writes Read in the letter to Downing Street.
“Establishing the world’s largest research-based pharmaceutical company in the UK, together with the commitments made in this letter represent a strong indicator of the incentives that your Government has created to attract successful business to the UK,” he continues.
Pfizer will have to convince the Government of the merits of the deal, given the importance of the life science sector to the UK economy. Moreover, deals such as the 2012 takeover of confectionary giant Cadbury by Kraft – which included a raft of promises that were not kept, including the retention of a production plant – has dented confidence in the promises of big business.
For its part, AZ had previously rejected the lower bid as undervaluing the company, with CEO Pascal Soriot re-asserting the intention to remain independent during the firm’s recent first-quarter results presentation. Since the rejection of the earlier offer, Pfizer has been courting large AZ shareholders with its sweetened deal, which comprises 30 per cent cash and 70 per cent Pfizer stock.
UPDATE
AZ has issued a statement saying its board has rejected the latest bid from Pfizer as “inadequate”.
According to AZ the terms of the deal “substantially undervalue AstraZeneca and are not a basis on which to engage with Pfizer”.
Leif Johansson, chairman of AZ, said: “AstraZeneca continues to invest significantly in research, development and manufacturing in the UK, Sweden and the US. We are showing strong momentum as an independent company, in particular with our exciting, rapidly progressing pipeline, which the Board believes will deliver significant value for shareholders. Pfizer’s proposal would dramatically dilute AstraZeneca shareholders’ exposure to our unique pipeline and would create risks around its delivery. As such, the Board has no hesitation in rejecting the Proposal.”