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May 16, 2014 8:10 pm
Pfizer’s attempt to buy AstraZeneca could be blocked by an incoming Labour government if the deal is not completed before next year’s general election, Chuka Umunna, shadow business secretary, has warned.
Mr Umunna’s threat adds a new layer of political risk to the US pharmaceutical company’s takeover approach to Britain’s AstraZeneca. Lawyers say any transaction could take anything from nine months to 18 months to complete.
Labour’s hostility to the proposed takeover has hardened during a week in which Ian Read, Pfizer’s chief executive, was questioned by MPs on two Commons committees over the company’s future plans for jobs and research in Britain.
Mr Umunna said the evidence had confirmed “the worst fears” of those in the science community that the takeover would cost jobs and would create a great deal of uncertainty.
His warning that Labour might try to stop the deal if it was deemed to be against the public interest raises the stakes, especially since regulatory approval could take many months in jurisdictions including the US, UK and China.
“If we were elected we would move swiftly to strengthen the public interest test and that would apply to any deal that had not been completed,” Mr Umunna said.
Labour would widen Britain’s public interest test for takeovers to cover strategic science and research and development. Such a move would require Brussels approval: the EU currently permits tests only in areas covering national security, financial stability and media plurality.
If approved by Brussels, Mr Umunna would then commission an independent report on whether any Pfizer takeover of AstraZeneca was in the public interest. He said that if he was advised the deal was not in the public interest, he would block it.
There are many hypothetical elements in such a scenario, not least the question of whether Labour will win the next election and how long a deal might take to close. But lawyers say the deal is so complex that it is possible it will not have been concluded by May 2015.
Mr Read returned to New York on Friday after staying an extra day in London after the committee hearings to lobby AstraZeneca investors on the merits of a deal. People close to Pfizer say he felt the week was a success, having survived his questioning from MPs without serious damage. Several big AstraZeneca shareholders, meanwhile, have signalled that they are open to a deal at the right price.
AstraZeneca has so far refused to talk with Pfizer over its latest £50-per-share informal approach. Pascal Soriot, chief executive, said the board was mindful of its duty to shareholders and would consider a higher offer from Pfizer – leading some analysts to speculate that he could be laying the ground for a friendly deal.
However, people close to AstraZeneca said on Friday that there had been no change in its belief that the company is better off independent and that a deal was not inevitable.
Pfizer is expected to return with a higher bid before the May 26 deadline for it to “put up or shut up” under UK takeover rules. A suspension of trading in Pfizer shares in New York caused speculation on Friday that a new offer was imminent. But the trading halt was in fact triggered by news of the results of a Food and Drug Administration trial of a Pfizer drug.
Pfizer and AstraZeneca declined to comment on potential intervention by a future Labour government. People close to both companies acknowledge that a hostile takeover could take more than a year to complete, but an agreed deal would probably be wrapped up sooner.
Charles Martin, senior partner at Macfarlanes law firm, said: “Chinese competition clearance for a transaction of this complexity could take a considerable amount of time – the process is much longer than other jurisdictions. Glencore-Xstrata took at least 14 months to clear.
Referring to recent bribery allegations levelled in China against GlaxoSmithKline, Mr Martin added: “UK pharmaceutical companies are probably not flavour of the month in Beijing at the moment.”
Additional reporting by Arash Massoudi in New York
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