PRODUCT PROFILE

Latest Dublin Prices

NAME
LATEST
CHANGE
Aer Lingus 1.36 0.01 more
BoI 0.31 0.01 more
CRH 17.46 -0.12 more
Glanbia 11.59 -0.01 more
Greencore 0.64 -0.02 more
Ind. News 0.12 0.01 more
Ryanair 7.38 0.23 more

 

EU to block UK intervention in Pfizer

Thursday, May 08 16:19:46

The European Commission would probably block any attempt by the British government to intervene in Pfizer's proposed takeover of AstraZeneca as Brussels itself would rule on a deal of that size, competition lawyers say.

AstraZeneca has rejected the $106 billion bid to create the world's largest pharmaceuticals business. However, Pfizer is still pursuing its British rival, and political pressure is growing on Prime Minister David Cameron to show he can protect jobs should the New York-based company prevail.

Cameron initially signalled he would not interfere in the bid. However, the Conservative leader - who faces a parliamentary election this time next year - now says he wants further commitments from Pfizer before giving his blessing to any takeover of Britain's second largest drugs group.

He has also not ruled out a suggestion from his Business Secretary Vince Cable that a takeover could be subjected to a "public interest test" - one of the few occasions when ministers can intervene in a country which prides itself on being open to foreign investment.

Any plan to invoke the public interest test on a pharmaceutical deal, however, would be likely to come up against the Commission, which allows intervention by European Union national governments only in exceptional cases.

"Politically this is big because there are lots of jobs involved and we're getting near an election," Anthony Woolich, a competition partner at international commerce law firm, Holman Fenwick Willan LLP, told Reuters.

"(But) I think it's going to be very hard for the government to intervene. The whole point about the European Commission is that where you have big mergers they should be regulated centrally and individual member states should not be able to intervene except on exceptional grounds."

Pfizer's offer has dominated British politics this week and poses a challenge to Cameron who is often accused by critics of favouring the interests of big business over workers.

The anti-EU UK Independence Party, which is forecast to win European parliamentary elections later this month, could also seize on any involvement by Brussels to back up its argument that Britain has yielded too many powers to Europe.

Britain has been open to foreign investment since prime minister Margaret Thatcher liberalised markets in the 1980s. This is in contrast to France which in 2005 named dairy group Danone as a company of strategic importance to shield it from a feared takeover by PepsiCo.

But Westminster politicians have become wary since U.S. group Kraft bought confectionary group Cadbury in 2010, winning support by promising to keep open a British factory only to announce its closure soon after the deal completed.

Pfizer, which would save billions of dollars in taxes by shifting its domicile to Britain, has already pledged to complete a new UK research centre, retain a factory and put a fifth of its research staff in the country if the deal goes ahead.

However, Pfizer also drew criticism three years ago when it shut most of its research work at a large R&D centre in Sandwich, southern England, with the loss of nearly 2,000 jobs.

The government's position on the AstraZeneca deal cannot be ignored by Pfizer, given the highly regulated nature of the drugs sector and the need for pharmaceutical companies to work closely with the state-run National Health Service.

"All governments are important stakeholders," said one person familiar with Pfizer's thinking. However, Pfizer remains committed to getting the deal done, he added.

Under EU law, takeovers are examined purely for the impact they would have on competition in the sector, and not on jobs.

Member states can intervene in takeovers of defence companies that affect national security as well as deals that reduce the number of media owners and those that could destabilise the financial system.

The British government would have to create a new category if it were to invoke the public interest test in any AstraZeneca takeover, aiming to impose legally binding terms on jobs and facilities. While this could be done easily in Westminster, the Commission would be unlikely to accept it.

"The EU merger regulation enables, for example, intervention in media cases but it's not a carte blanche to bring in any kind of public interest," Becket McGrath, a competition partner at Edwards Wildman Palmer, said.

One top 30 shareholder in AstraZeneca told Reuters they were unsurprised by the political involvement but did not expect the Conservative-led coalition to turn "French".

"Without being too pedantic, the making of a cancer drug versus the making of a chocolate bar is somewhat different," the shareholder said. "Everybody gets excited with science and think we (the UK) do pharmaceuticals quite well. (Reuters)