Fancy being the owner of a pharmaceutical giant? Our advice: don't go for AstraZeneca. It turns out the Anglo-Swedish company plays very, very hard ball.
The company has rejected a third offer, of £50 a share, from US giant Pfizer, saying the price is 'inadequate, 'substatially undervalue[s] AstraZeneca and [is] not on a basis on which to engage'. It's 'strongly advised' shareholders to 'take no action'. 'There can be no certainty that an offer will be made nor as to the terms on which any offer might be made'.
Ooof. The offer from Pfizer was two-thirds cash and one-third shares, slightly above the 70-30 split it originally offered. It represents a 32% premium from the closing share price on April 17, when Pfizer was first rumoured to be interested. There's no denying the company is keen...
The worry, for the pharmaceutical industry, is what an acquisition would do for British jobs: Pfizer has already closed a massive research centre in Sandwich (incidentally the place where they discovered Viagra, aka the 'Pfizer Riser'). To sweeten AstraZeneca's board, Pfizer boss Ian Read wrote to the prime minister with a list of promises.
Most significantly, Read said he will move the headquarters of the combined company to the UK (not the great sacrifice you might imagine: as we've been saying all along, it has $47bn sloshing around its bank account that would be much cheaper to repatriate into the UK than the US). He also says Pfizer will finish building an AstraZeneca research campus in Cambridge, keep 'substantial' manufacturing facilities in Macclesfield and keep 20% of the combined company's workforce in the UK.
Of course, there's always the risk that once the deal is done and dusted, Pfizer could do what is technically termed 'pulling a Kraft' - ie. all those promises about keeping factories open and looking after British jobs will turn out to be nothing more than hot air.
That's exactly what Lord Heseltine (full disclosure: Heseltine owns Haymarket, MT's publishing company) wants to prevent: this morning, he said the government should have 'reserve powers' to protect British businesses if it thinks jobs are at risk.
'Every other advanced economy has mechanisms of some sort on a failsafe basis to scrutinise foreign takeovers and we're the only country that doesn't,' he told the BBC. To be fair, he's well known to have that view: in his secretary of state days, he told the Tory party conference that to protect business 'I'll intervene before breakfast, before lunch, before tea and before dinner. And I'll get up next morning to start again'.
Critics of his view would point out that part of the UK's continuing commercial success over the past few decades has been that the government hasn't got involved, a la the French government's 2012 decision to protect yoghurt company Danone on the grounds of it being 'a flower of our industry'. Then again, Kraft's hostile takeover of Cadbury, followed by the closure of its factory in Keynsham, shows why government intervention might sometimes be required.
Although if Read has offered David Cameron his guarantee, he would have to be particularly dastardly to renege. Presumably, AstraZeneca is waiting for Pfizer's next move.
- Lord Heseltine will speak at our MT Live conference on June 25. At the moment, you can get a 15% discount on the ticket price - book here.