Plans by US pharmaceuticals giant Pfizer to pursue a US$100bn takeover of its smaller UK-Swedish rival AstraZeneca has spurred the British government to study the likely impact on jobs and scientific research.
The parliamentary business, innovation and skills committee are concerned that any deal between the two groups, which would represent the biggest-ever foreign acquisition of a UK company, could damage the country’s strategic interests. Astra-Zeneca is the second-biggest UK pharmaceuticals group after GlaxoSmithKline (GSK).
Pfizer has already made two bid approaches to AstraZeneca, which were rejected. The US group is expected to follow-up with a revised offer before a deadline of 26 May, which under UK takeover rules requires it to withdraw if no further bid is forthcoming.
Committee member Ann McKechin told Reuters that members are “keen to look closely” at the proposed union. “Clearly given the scale of the proposed merger it is important that we consider the impact not just on shareholders but also on employees and the wider interests of the UK,” she told the news agency.
Reports suggest that a major incentive for Pfizer as a US company buying an overseas competitor is the opportunity to incorporate in the UK and escape the current US corporate tax rate of 35%. The UK rate is being steadily reduced, dropping to 21% at the start of this month and to 20% from April 2015.
US multinationals have overwhelmingly held cash overseas in recent years to avoid the tax rate that the federal government charges on repatriated earnings. Earlier this week, Apple raised US$12bn in a bond sale to finance shareholder rewards instead of bringing its overseas cash back to the US. According to credit ratings agency Moody’s, about 60% of total corporate cash holdings – around US$950bn – is being held offshore by US corporations.
A report in
The Washington Post
cites Richard Murphy, a London-based accountant and advocate, who believes that UK chancellor George Osborne is deliberately pursuing a policy on transforming the UK into a corporate tax haven similar to Bermuda and Switzerland.
“The consequence of the change that Osborne introduced was to make the UK itself into a tax haven, and that is exactly what Pfizer wishes to exploit by taking over AstraZeneca and then relocating its headquarters, at least notionally, to become a UK resident,” Murphy wrote on his blog, Tax Research UK.
Pfizer itself has said that it views the UK as an attractive location for both research and manufacturing, helped by recent government tax incentives. However, the group has made no firm commitments on future investment or employment.
Pfizer owned a UK research and development facility at Sandwich, Kent, which developed the anti-impotence drug Viagra but in 2011 announced that it was closing the site with the loss of nearly 2,000 jobs.
The UK government also remembers the opprobrium that accompanied Kraft’s acquisition of the UK food group Cadbury in 2010. Kraft promised to keep open a key factory, only to break its pledge soon after the deal was completed.
“The committee previously had a great deal of concern over the Cadbury takeover, so I think this is one we will really have to closely analyse what is on offer,” McKechin said.
Pfizer’s chief executive officer (CEO), Ian Read, is currently in the UK to meet senior government figures and key investors in an attempt to secure support for a deal.
A report by broking group Marsh examines the repercussions from the administration of the South Korean company, which filed for bankruptcy protection at the end of August.
Global research by C2FO suggests that smaller businesses are less concerned with the repercussions of Brexit and the upcoming US presidential election.
A squeeze on skilled talent means it now takes an average of seven weeks to fill open permanent roles in finance in the UK according to new research from financial services recruitment firm Robert Half.
Early-stage merger and acquisition deals in Asia-Pacific show nearly 10% year-on-year growth in recent months.