According to an article in Fierce Biotech this morning, there seems little liklihood that anything will stop Pfizer from completing a purchase of AstraZeneca -- it's almost inevitable. Really, it comes down to the detail of how much will Pfizer have to increase its offer to AZ, and how much of that will be in cash versus stock. First Word Pharma says that Pfizer is busily workng on an offer equating to $106 B to bring AZ to the bargaining table.
That's on the one hand. However, the Pfizer-AZ potential deal has others more worried. Some British government officials are worried that Pfizer, once having completed the purchase, will cut jobs in the UK. Especially troubling would be the loss of research jobs. Critics point out that Pfizer did close its Sandwich R&D center in the past couple years and swept away 2000 jobs with it. Given that history, some members of government are asking that Pfizer make guarantees as to its intentions. For its part, Pfizer's CEO says the UK is a lovely place to do business with its lower tax rate and good science. But....Fierce also published today that Pfizer post-merger with Wyeth, actually reduced the number of jobs in the combined company -- through terminations and sell offs of divsions -- by 51,600 between 2008 - 2013. Concerns might be understandable then? See Bloomberg, Pharma Times and Fierce Pharma.
Another issue raised by the prospect of this deal is it thrusts tax inversion strategies back to the fore. It seems folks in the UK are upset that its government's tax policies might actually be encouraging foreign investors to buy up British companies for the tax breaks. This would not be perceived as much of a problem if all the jobs remained intact, but is a problem if mass layoffs ensue. US lawmakers on many fronts are also not thrilled that major corporations, like a Pfizer, can flee the US for greener tax pastures. That's a lot of money going out the door through a loop-hole that clearly exists in the US tax code. Good luck getting a contentious Congress to sit still long enough to close that one. Right now, a move to the UK would certainly afford Pfizer and its shareholders a big tax benefit at the expense of the US Treasury. On the other hand, either the UK or the USA could alter their codes and the tax benefit might be severely diminished. In which case, Pfizer and its shareholders better really want that AZ asset. See Bloomberg.
Posted by Bruce Lehr May 1st 2014.