Pfizer under fire in Europe, U.S. as it weighs next Astra move

LONDON Fri May 9, 2014 8:28am EDT

A man walks past Pfizer's world headquarters in New York April 28, 2014. REUTERS/Andrew Kelly

A man walks past Pfizer's world headquarters in New York April 28, 2014.

Credit: Reuters/Andrew Kelly

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LONDON (Reuters) - U.S. drugmaker Pfizer (PFE.N) is under fire on both sides of the Atlantic as it weighs its next move to buy British rival AstraZeneca (AZN.L), which could be a sweetened offer next week.

A strategic question for Pfizer and its advisers is whether to come back with a new bid before bosses from both companies are grilled by UK lawmakers on May 13-14, or wait until the end of the week.

Two people familiar with the matter said on Friday it would be more "polite" for Pfizer to explain its current position to the two parliamentary committees before pushing out a new offer.

The New York-based company's record of slashing jobs after a string of earlier mergers has provoked a political backlash against the proposed $106 billion takeover at home and in Britain, with two U.S. state governors joining the fray on Thursday.

Maryland Governor Martin O'Malley and Delaware Governor Jack Markell wrote to Pfizer Chief Executive Officer Ian Read "expressing deep concerns" about the planned deal, given the fact that AstraZeneca employs 5,700 people in the two states.

Many in the United States fear Pfizer's promise to Britain that the combined company would keep 20 percent of its research and development workforce in the country will inevitably jeopardize American jobs.

It is the same fear that agitates politicians in Sweden, where Prime Minister Fredrik Reinfeldt said his country had already had "negative experiences" with Pfizer after it failed to honor promises on jobs following its 2002 acquisition of Pharmacia.

In Britain, however, there are concerns that Pfizer's vows leave too much room for it to renege on its promises, and Prime Minister David Cameron, who initially welcomed Pfizer's "robust" assurances, now wants more commitments.

Deputy Prime Minister Nick Clegg said on Friday that the government needed to be confident about any such promises. "Our focus is to make sure that, if the companies decide to proceed, the commitments ... are serious ones, are durable ones, and are ones that will stick," he said at a Reuters newsmaker event in London.

There is also growing disquiet about Pfizer's desire to reincorporate in Britain to cut its tax bill, with U.S. Democratic senators weighing legislation to prevent such tax "inversions".

ASTRAZENECA ROADSHOW

AstraZeneca has rejected successive approaches from its larger American rival and Chief Executive Pascal Soriot is now on a roadshow with advisers to meet dozens of leading investors and lay out his strategy for a prosperous independent future.

Soriot has secured the backing of several high-profile shareholders but others have told Reuters they would like him to engage with Pfizer if the U.S. group makes an improved offer.

Shares in AstraZeneca, which rallied nearly 2 percent on Thursday on talk that an improved bid might be imminent, fell back 1.8 percent on Friday afternoon.

"I can't see there being much movement from these levels until there's more clarity on Pfizer's intentions," said Central Markets trading analyst Joe Neighbour.

The collapse of a $35 billion merger between advertising giants Omnicom (OMC.N) and Publicis (PUBP.PA) has added some uncertainty around the proposed giant pharmaceutical deal.

The Omnicom-Publicis tie-up would also have involved an advantageous change of tax residence but faced a series of problems, including anti-trust hurdles in China, which may also snag Pfizer.

The deals are, however, fundamentally different. The two ad agencies sought a merger of equals, leading to feuding over top executive roles, while Pfizer's move on AstraZeneca would be a straight takeover.

"People will look for links but the reality is there isn't any real read-across on points of substance," said one person familiar with Pfizer's thinking. "Large mergers are difficult but every deal of this size brings its own issues."

(Additional reporting by Sudip Kar-Gupta, Guy Faulconbridge and William James; editing by David Stamp)

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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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