UPDATE 1-Britain says may use public interest test in Pfizer bid for AstraZeneca

Tue May 6, 2014 12:01pm EDT

(Adds explanation of public interest intervention)

LONDON May 6 (Reuters) - Britain could use its public interest powers to intervene in U.S. drugmaker Pfizer's potential takeover of British pharmaceutical firm AstraZeneca , Business Secretary Vince Cable said on Tuesday.

Prime Minister David Cameron is facing growing pressure from lawmakers to secure undertakings from the New York-based company if it pulls off Britain's biggest takeover by a foreign buyer.

"The government must and will approach it from a position of even-handed neutrality and recognise that this is ultimately a matter for the shareholders of both companies," Cable told parliament.

"One of our options as the government would be to consider using our public interest test powers. This would be a serious step and not one that would be taken lightly but I'm open-minded about it whilst stressing that we are operating within serious European legal constraints."

The public interest test is enshrined in British merger law and gives ministers the power to intervene in deals, but only for a limited number of reasons, mainly national security, media company mergers and banks.

Cable said the current structure did not give the government scope to address concerns about jobs and research and development investment raised by the potential Pfizer takeover.

On Sunday Cable said that he was considering all options, including reviewing the terms under which the public interest test could be applied, to protect Britain's scientific research base.

The legislation was previously altered during the 2008 financial crisis to give the government powers to intervene in banking mergers in the interests of preserving financial stability. (Reporting by William James and Sarah Young, editing by Guy Faulconbridge)

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