State must intervene in the fight for AstraZeneca
Cosseting national champions isn’t the British way. But is it time to make an exception
LAST month, the London mayor, Boris Johnson, highlighted a grand plan to build a "golden triangle" between Oxford, Cambridge and London to create a life sciences centre to rival that of the US's Boston Bay.
A vital ingredient of the plan, says The Guardian, is AstraZeneca's new £330m HQ in Cambridge. Britain's second largest pharmaceutical company employs 7,000 people, supports another 23,000 jobs, and is responsible for about 2.3 per cent of British exports. It is also making the running in the battle against cancer, with a new generation of immunology drugs that build on the body's own defences to combat tumours.
"In short, AstraZeneca is absolutely integral to the future of Britain's science base." And it is now under threat. The American Goliath, Pfizer, has tabled a £60bn hostile mega-bid for the company – the largest proposed takeover in British history.
In stark contrast with the outcry in France over the fate of its national champion, Alstom, the snap response from No 10 appears to be – "help yourself", says Benedict Brogan on Telegraph.co.uk.
The Government rightly thinks that shareholders, not ministers, should decide the fate of companies. But "if ever there was a moment to be fearful for Britain's future as an advanced science-based manufacturing economy it is now", says Alex Brummer in the Daily Mail. Pfizer has promised to make Britain "the centre of its research activity". But it has a "less than honourable record" here: in 2011, it closed down its only R&D facility in the UK, axing 2,400 jobs.
Contrast this with our own drugs industry's "universally admired record" of investing in R&D, which our "spineless" politicians seem only too willing to jettison.
Luckily, AstraZeneca's French CEO, Pascal Soriot, is preparing to fight. But he doesn't have a "friendly" share register on his side. The biggest shareholder, the US fund manager BlackRock, is not known for "its interest in the broader good of the British economy".
Why does Pfizer want AstraZeneca so badly? Like other big pharmas, it is "wrestling with the difficulty of discovering new blockbusting treatments", says the FT. But a big part of the attraction involves tax. Were it to buy AZ, Pfizer could re-domicile here for tax purposes, thus avoiding a hefty US charge on "the huge cash pile" currently held offshore. The UK is very attractive, thanks to the ten per cent "patent box" tax break on profits introduced in 2012. But tax arbitrage alone "cannot be allowed to drive this deal".
Britain is "uncomfortable" with the idea of state interventions. But, with such a strategic industry at stake, "the Government cannot afford to pursue laisser faire at all costs". If this deal proceeds, ministers must seek proper "assurances and guarantees". Wider national interests are at stake.
A version of this article appears in the 2 May 2014 edition of The Week