Downing Street expected to back Pfizer’s takeover of AstraZeneca
New £63bn bid likely next week as government advisers warm to US charm offensive
Jim Armitage is the City editor of The Independent and London Evening Standard group of newspapers. He has been a reporter and editor for more than 20 years and was recently shortlisted for the Press Gazette financial journalist of the year and The Society of Editors financial journalist of the year awards. He contributes news, investigative reports and comment to the Independent titles plus a daily column in the Evening Standard.
Friday 02 May 2014
The Whitehall advisers handpicked by Downing Street to negotiate with the US pharmaceuticals giant Pfizer over its £60bn bid for AstraZeneca could be days away from giving the deal the green light despite widespread concerns about its implications for UK research.
The Prime Minister and Chancellor appointed Jeremy Heywood, the Cabinet Secretary, and the senior civil servant John Kingman to lead talks on behalf of the Government. The former investment bankers were given a mandate to proceed with the negotiations on the basis that the deal should be welcomed as a potential major investment in the UK, reports said yesterday.
The officials are thought to be holding detailed negotiations over guarantees for the country’s valuable research and development base if the deal goes ahead. AstraZeneca employs 7,000 UK staff. While Pfizer is refusing to commit to keeping them, it is expected to agree that the combined UK headcount across both companies would not be reduced.
The BBC last night cited sources saying that if a deal with the Government proceeds as planned, it could result in a new takeover offer from Pfizer next Tuesday, the day after it reports its financial results.
MPs on the Business Select Committee yesterday said they would be calling ministers including the Business Secretary, Vince Cable, to appear before them to discuss the implications of the potential deal, with some voicing concerns that the Government was being too laissez-faire about a core strategic industry.
Once the Government accepts Pfizer’s terms, the deal will just come down to price, which will be haggled over with AstraZeneca’s shareholders. City investors largely believe the deal will be done, with Pfizer upping its offer to £50-£55 a share, about £63bn. The informal offer rejected as “significantly” undervaluing the company by AstraZeneca’s board was priced at £46.61.
AstraZeneca’s shareholders said that Pfizer executives who are in London selling the deal this week have been promising big dividends because they are proposing to pay with a mixture of cash and shares.
One top 20 shareholder was not convinced that the takeover would succeed, though: “The share price has risen, people are more confident in the research and development pipeline and are starting to believe Astra’s organic growth story. They are going to have to pay a good premium to make this deal happen.”
That was the line being promoted by AstraZeneca’s chairman, Leif Johansson, who yesterday pointed out that big pharmaceuticals mergers do not necessarily increase value for shareholders. He said “bigger is not always better.”
The Government’s view that Pfizer’s bid was a vote of confidence in the British economy and its low tax status chimed with evidence of Britain’s manufacturing revival yesterday, which sent the pound surging to a five-year high.
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