Why US drug giant Pfizer's interest in a 'mega takeover' of AstraZeneca concerns us all

General view of the entrance to AstraZeneca's in Macclesfield Photo: PA

Pfizer's interest in AstraZeneca should be of interest to us all.

The medicines and vaccines these companies develop, make and sell are prescribed on the NHS everyday.

AstraZeneca employs fewer than 7,000 people here in Britain but it's one of those "economically important" companies governments tend to get fiercely protective about. The drugs it makes have such a high value that they account for more than 2% of all the goods Britain exports to the rest of the world.

The company is "British" in the sense of its roots (born out of ICI) and its listing (the London Stock Exchange) but rather like GlaxoSmithKline its reach is global - with many of its shareholders overseas - and it has important research centres in Sweden and the United States as well as the UK. Pfizer is clearly prepared to pay a colossal sum of money for AstraZeneca and this morning its chief executive, Ian Read, has been spelling out why.

Corporation tax rate in the UK is now so low, relative to the US, that Pfizer wants to locate here. Credit: PA

Crudely put, he thinks this mega takeover (let's call it what it would be) would buy Pfizer: ownership of an exciting pipeline of drugs that AstraZeneca is in the process of developing (in the area of cancer in particular); a phalanx of highly-skilled staff; and the opportunity to save a shed load of money.

Mr Read was careful not to elaborate about the "significant operational synergies" he spies but they would, of course, involve job losses. They would also involve some large tax savings.

The Pfizer bid, when it happens, will be characterised as a US giant gobbling up a smaller British rival (and in many ways it is) but while Pfizer intends to list this new behemoth in New York, it will domicile it in the UK. This is because the corporation tax rate in the UK is now so low, relative to the US, that Pfizer wants to locate here. The Chancellor, George Osborne, has spent a fair few Budgets trying to make the UK an attractive place to do business but I'm not sure that this was quite what he had in mind.

Vice President of Pfizer, Ian Read Credit: Reuters

The size of this deal may cause Pfizer a few frustrations. It's almost certain to be referred to the competition authorities in Europe, our government may feel it wants to "ok" any deal, although it's not really clear that it would have the scope to be able to. There are not obvious issues of media plurality, financial stability or national security at stake here.

Ian Read says if this deal does go ahead it would be lead to £100 billion being invested in the British pharmaceutical sector. He is also promising that patients on the NHS will benefit in the form of "better products, faster".

But the Business Secretary, Vince Cable will want some cast iron reassurances about its long-term commitment to the UK. In 2010 Kraft promised to keep a factory near Bristol open when it took over Cadbury, in 2011 Kraft closed it. In the same year Pfizer closed its R&D centre in Sandwich where 2,400 people worked.

Of course, I am getting rather ahead of myself here. Pfizer has yet to formally bid but it has this morning publicly declared it's amorous intentions. AstraZeneca appears determined to resist. The rules of courtship demand that in the face of unrequited love the suitor retreats.

In business the rules are different. Pfizer has so far failed to woo the AstraZeneca board, if it remains unresponsive Pfizer is likely to "go hostile", direct to AstraZeneca's shareholders.

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