9th May 2014 10:42
LONDON (Alliance News) - Shareholders in Viagra maker Pfizer Inc could take a tax hit if its proposed takeover of UK pharmaceutical giant AstraZeneca goes through, the Wall Street Journal reported, as it separately emerged a key British medical research body had written to the UK government saying it had major concerns over the potential takeover.
A tax provision in US tax rules is triggered when a US company buys a firm overseas and re-domiciles in a bid to reduce its own taxes, the Wall Street Journal reported. As a result, Pfizer's shareholders would owe capital-gains tax on the appreciation in their shares when they are converted into stock in the new company, it said.
In Pfizer's statement in April, when it first announced that it had been in discussions with AstraZeneca regarding a potential takeover, it said that it would be a "taxable event" to Pfizer shareholders.
Separately, Friday British medical research foundation the Wellcome Trust said in a letter to Chancellor of the Exchequer George Osborne last Friday that it had "major concerns" over the potential merger.
Chairman William Castell said that the trust was "acutely aware of the critical role which AstraZeneca plays in the UK's life sciences ecosystem, as one of only two large pharmaceutical companies to purse substantial R&D activity here."
Castelll went on to detail how Pfizer's previous acquisitions had led to a reduction in research and development activity in the past, and concerns that this would happen again.
Castell noted that it had been encouraged by the pledges Pfizer had made in its open letter to Prime Minister David Cameron, particularly its commitments to operating AstraZeneca's Cambridge R&D facility, and keeping 20% of its combined R&D workforce in the UK.
However, Castell said that it was critical that the UK Government ensured that these commitments were upheld as Pfizer "has not always honoured similar undertakings made following past acquisitions."
After AstraZeneca rejected Pfizer's initial approach, Pfizer made a second approach for the company of GBP50 per share last Friday, valuing it at GBP63 billion.
However, AstraZeneca rejected this second offer on similar grounds, saying that it significantly undervalued its business. On Tuesday AstraZeneca set out its defence to its shareholders, reaffirming that it expects revenue to return to 2013 levels in 2017, and expects revenues to more than double over the five years after that.
Shares in AstraZeneca were trading down 1.3% at 4,652.29 pence Friday morning.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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