Pfizer has ignited a takeover battle for one of the biggest prizes in the global pharmaceuticals sector with its £60 billion (€72.8 billion) approach for rival AstraZeneca in a move that has raised political concerns on both sides of the Atlantic.
Shares in AstraZeneca jumped 15 per cent yesterday after Pfizer publicly urged the London-listed group to enter talks over what would be the biggest foreign takeover in UK history.
Cautiously positive
Downing Street gave a cautiously positive reaction to the US drugmaker's plan, citing its intention to shift the merged group's tax domicile to the UK if the deal was successful as proof of Britain's attractiveness to foreign investment. But some politicians, union leaders and scientists expressed fears over what a takeover of Britain's second-biggest drugmaker after GlaxoSmithKline would mean for jobs and investments. AstraZeneca employs about 7,000 people in the UK and accounts for more than 2 per cent of exported goods.
Both companies have operations in Ireland, with Pfizer employing about 3,200 in various locations around the country, and AstraZeneca employing about 60 people in Dublin.
Pfizer’s disclosure that as part of the deal it would move its tax domicile to the UK faces political headwinds in Washington, amid alarm over what has become a trend among US multinationals.
Dave Camp, the top Republican tax writer on Capitol Hill, said: “It is a real problem when the tax code provides an incentive for US-based companies to move overseas, often taking good jobs with them.”
AstraZeneca said a tentative £46.61 per share offer by Pfizer made in January “very significantly” undervalued the company and that, in the absence of an updated proposal, it would not open negotiations.
Tax savings
Ian Read, Pfizer chief executive, said a deal would produce value for shareholders of both companies by creating a powerhouse in treatments for conditions including cancer, diabetes and heart disease. It would also produce cost efficiencies – and tax savings from the UK's lower corporate tax rate and the potential to avoid US taxation of Pfizer's offshore revenues.
Pfizer would aim to bring down its average tax rate from more than 27 per cent to about AstraZeneca’s 21 per cent figure.
People close to AstraZeneca said it would consider a deal if Pfizer made a high enough offer. – Copyright The Financial Times Limited 2014
