AstraZeneca takeover: Nick Clegg turns up the heat on Pfizer

http://www.theguardian.com/business/2014/may/09/astrazeneca-takeover-nick-clegg-pfizer

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Deputy prime minister Nick Clegg turned up the pressure on Pfizer on Friday over its £63bn pursuit of Britain's AstraZeneca, urging it to make a binding commitment to UK jobs and research and warning it would be "pretty daft" to mount a takeover without government backing.

The Lib Dem leader played down the prospect of an official public interest test but warned Pfizer that the government had "meaningful leverage" through its spending on life sciences, implying millions of pounds worth of government funding for research could be at risk if the American drugmaker failed to honour promises to protect Britain's science base. His warning came as the governors of the US states of Maryland and Delaware wrote to Pfizer expressing concerns over jobs in the US if America's biggest drugmaker moves its headquarters to the UK in an attempt to reduce its tax bill.

US Democratic senators are considering legislation to make it harder for US companies to relocate overseas to sidestep US taxes. Ron Wyden, who chairs the Senate finance committee, called for this loophole to be plugged. "While they may not be breaking US laws, many of these companies are navigating a loophole in America's broken and dysfunctional tax code. And while their shareholders may secure a temporary win, workers, taxpayers and this country all lose." He also reiterated that the US corporate tax rate of 35% – one of the highest in the world – needed to be cut.

George Osborne visited an AstraZeneca plant in his Cheshire constituency, where he said Britain's "national interest" was relevant to the deal. The chancellor said the government considers this to be "securing good jobs and good science" and would support "whatever arrangement best delivers that for Britain".

The decision on applying a public interest test – by changing the law or appealing to Brussels – lies with Vince Cable, the Lib Dem business secretary, who said Britain should be seen as a "knowledge economy, not as a tax haven".

Clegg sounded a similar warning note on the deal at a Reuters event on Europe, saying the government was "not neutral and not indifferent about the effect that [takeover] decisions may have on issues of legitimate public interest: the excellence of Britain's research base, the capacity for us to continue to excel in science, the capacity for us to continue to lead in the life sciences sector internationally".

Referring to the possibility of a public interest veto, Clegg said: "We have those legal powers, but I actually think our powers in many respects are more of the indirect and informal version – because I would have thought every major player in the pharmaceutical sector would need to know they were going in the grain of government policy and approach to these things."

He added: "If you have an ongoing conflict between government policy and the commercial sector in this area, when there is so much taxpayers' money involved and public policy involved, that would seem to me to be a pretty daft thing to do.

"Pfizer has a real interest to make sure what they say is consistent with the direction of public policy, and that is why we've been really quite tough – we're saying these things, how can we be really sure you stick to it."

In an attempt to show its commitment to British science, Pfizer struck a five-year collaboration deal on rare diseases with top British universities on Friday. Its scientists will be working with researchers from Cambridge University, Imperial College London, King's College London, Queen Mary, University of London, University College London and Oxford University to develop new medicines for rare diseases. There are over 6,000 recognised rare diseases that together affect more than 3.5m people in the UK alone and 60m across Europe and the US.

Meanwhile, it emerged that the Labour leader, Ed Miliband, turned down a request for a meeting with Ian Read, the Pfizer chief executive. The BBC's Newsnight reported on Thursday that Miliband's office replied saying he would be too busy campaigning, although it is understood he is now trying to find time.

Miliband has criticised David Cameron for appearing to be a "cheerleader" for the deal and called for a public interest test to protect the UK's science base. However, he was last night criticised by Osborne for turning down the chance to meet Read.

Downing Street has stressed it will be up to shareholders to make a decision about the deal but senior ministers have increasingly stressed their commitment to protecting jobs. Cameron has said he is "fighting" for the best outcome and is not yet satisfied but assurances made by Pfizer so far are "encouraging".

There are already tensions within the Conservatives over whether the deal should go ahead, with former leadership candidate David Davis saying he believes it would fail a public interest test. Other backbenchers fiercely believe there should be no intervention in the free market, while Tory party chairman Grant Shapps has branded Miliband's proposal for a public interest test "anti-business, anti-jobs and anti-jobs security".

After setting out ambitious business forecasts for the next decade, AstraZeneca's management led by Pascal Soriot went on a road show this week, seeing shareholders in the UK, Sweden and the US. Analysts at Jefferies said: "Whilst these appear overly optimistic and are an obvious bid defence tactic, some of the product specific forecasts might resonate with investors and push the price and cash mix in the deal higher."

AstraZeneca shares ended the week 112.5p, or 2.4%, lower at £46, below Pfizer's £50-a-share proposal made on 2 May. The value of the cash and shares deal has since slipped to £47.60 due to a drop in Pfizer's share price.

Read and other Pfizer executives will be flying to London for two parliamentary committee hearings on Tuesday and Wednesday. They will be questioned over the proposed takeover alongside their counterparts from AstraZeneca, business secretary and Cable, science minister David Willetts and union representatives.