13th May 2014 12:18
LONDON (Alliance News) - AstraZeneca PLC Chief Executive Pascal Soriot, Pfizer Inc Chief Executive Ian Read, and representatives of trade unions Unite and GMB met with the House of Commons' Committee for Business, Innovation and Skills Tuesday to discuss the potential takeover of AstraZeneca by Pfizer.
Discussions over the potential deal were not limited to the House of Commons Tuesday, with Pfizer releasing another statement regarding the benefits of a takeover for AstraZeneca and its shareholders. In tandem with the extensive talks, the UK drugs giant rejected the latest in a series of missives from the firm, saying that it believes Pfizer is "making an opportunistic attempt to acquire a transformed AstraZeneca, without reflecting the value of its exciting pipeline."
AstraZeneca rejected Pfizer's second takeover bid earlier this month, an offer of GBP50 per share which would have valued AstraZeneca at GBP63 billion, saying it significantly undervalued its business. The company has appealed to shareholders not to take action, reiterating last Tuesday that it expects its revenue to return to 2013 levels in 2017, and expects revenues to more than double over the five years after that.
Pfizer has been campaigning to UK lawmakers regarding a potential offer, including sending a letter to Prime Minister David Cameron May 2 that included commitments to UK investment such as re-domiciling its business in the UK, establishing 20% of the combined companies research and development workforce in the UK, and completing AstraZeneca's R&D centre in Cambridge.
In the letter, Pfizer said it would keep these commitments for five years.
The Chief Executives of both companies, alongside trade union officers, are providing evidence to the House of Commons' Business, Innovations and Skills Committee Tuesday.
Representatives of trade unions GMB and Unite expressed concerns about Pfizer's history, its reputation, loopholes in the statements it has issued so far and additionally the five year time frame it has given.
A five, or even a ten year time frame would be still too short a term, National Officer of GMB Allan Black said. In general, Black noted, pharmaceutical companies need to allow around 25 years for the research and development phase to bring a drug to market.
Under the UK takeover code, Pfizer's commitments given at the time of an offer are only binding for one year, although Pfizer itself has given a time frame of five years. Outside of this time frame, Read made an attempt to reassure the committee, saying that he himself was present to honour Pfizer's commitments.
AstraZeneca's Soriot reiterated the fact that five years was a short time frame in the pharmaceutical industry, with Leader of AstraZeneca's MedImmune arm in Cambridge, Jane Osbourn stating that "fives years is not enough" to demonstrate much in a merger of this kind.
Executive Vice President of Innovative Medicines and Early Development Mene Pangalos said that AstraZeneca's commitment to the UK already "goes way beyond five years."
Both Black and Assistant General Secretary of Unite Tony Burke said that they had not received any contact from Pfizer, which had raised concerns about whether or not Pfizer considered the workers important. The trade unions wrote to both AstraZeneca and Pfizer, and whilst AstraZeneca responded promptly, it said it had not received responses from Pfizer.
Members of the unions are opposed to the takeover, Black and Burke said.
Pfizer said it would have been inappropriate to speak with trade unions when there was no deal officially on the table, and it had conducted only limited conversations with AstraZeneca. However, the company said it will speak with the scientific community and trade unions if it were to propose a deal.
The Pfizer Chief Executive agreed that the total percentage level of spend on research and development for the combined company was likely to be lower, although he did not know by how much, although Read said the focus was not on the percentage level, but on how it was used.
When pressed as to whether or not Pfizer would reduce research and development spend to the UK, Read reiterated the company's commitment to having 20% of its global research and development workforce in the UK, but said that cannot make any commitments to spending on a country-to-country basis at the moment, as discussions with AstraZeneca have been limited.
Read said that Pfizer would be looking at where "the best place for Science" is, and added that the UK was a "great" place for science.
The committee also grilled Pfizer about its commitment to maintain a "substantial presence" in Macclesfield in Cheshire, however, Read only reiterated that it was too early to give any specific figures as it had not had any access to AstraZeneca's books.
"I'm a man of my word," Read assured, and said that although he could not define substantially, this would be made clear if and when a deal was put together.
When questioned about its commitment to the site, Soriot said AstraZeneca remained committed to the 2,000 employees at the site.
Pfizer Chief Financial Officer Frank D'Amelio said it would be "premature" to provide an estimate of the level of tax savings Pfizer would be able to make by re-domiciling in the UK, but said that it was safe to say it would be lower than the 27% rate it is forecasting for this year.
In relation to the possibility that the US is discussing alterations to its tax laws to avoid companies seeking to re-domicile elsewhere in order to cut their taxes, Read added that it was a "very remote" possibility that the US congress would be able to alter its tax laws in the time-line of the deal with AstraZeneca.
Soriot reiterated that the merger with Pfizer would be a "distraction" from its current work. The company also expressed concern that Pfizer's potential tax cuts as a result of the merger would attract controversy, and could impact the company's reputation. This would also potentially delay any transaction were they to make a deal, Soriot explained.
AstraZeneca has paid around GBP1.5 billion pounds in taxes in the UK over the last five years, it said. Last year it did not pay any tax, Soriot said.
Although the long term commitments were "welcome" Soriot explained, in the short term the merger would substantially disrupt its ongoing projects, he said.
Soriot said that it was difficult to speculate what Pfizer's commitment of 20% of its work force would mean; as the firm is yet to see any numbers, and could lead to more or less employment in the UK. Soriot reiterated that AstraZeneca has 30% of its research and development workforce in the UK, and was "committed" to the UK.
When questioned about whether or not a merger with Pfizer would lead to job cuts, Soriot noted that a merger of this "magnitude" would come with cost savings, and with cost savings would come job cuts.
Speaking at the hearing Soriot said that he believes the business is at a turning point. "This [potential] deal does not reflect the new AstraZeneca," Soriot said. "It reflects the old AstraZeneca."
However, Soriot did not write off the possibility of a deal altogether. "It's impossible to say we would not accept any offer," Soriot said.
Shares in AstraZeneca were trading up 2.2% at 4,710.00 pence, the third highest gainer on the FTSE 100 Tuesday afternoon.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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