The sign for the UK commercial headquarters of pharmaceutical firm Pfizer at Walton Oaks near Leatherhead. Photograph: Getty Images.
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The Pfizer / AstraZeneca takeover bid – the story of what Labour did and why

We were not prepared to allow Britain's valuable science base to be put at risk for narrow, short-term gains.

Pfizer’s audacious bid to takeover AstraZeneca is dead for the moment. Had Pfizer succeeded, it would have been the largest takeover in UK corporate history. Whatever impact the deal would have had on the two companies involved, it would have also had profound implications for British science, exports and jobs in one of the most important sectors of our economy. As well as important private interests being at stake, there were also clear and distinct public interests in the deal. 

Having been engaged with many of the principle actors in this drama – from the chief executives and boards of both companies to key figures from across British industry – I became convinced that this takeover was being pursued for the wrong reasons, that it would be bad for AstraZeneca, and that it would be bad for Britain. 

I am pleased that the AstraZeneca board remained clear-headed in the face of intense pressure and that, in this case, it was the board that rebuffed the offer.  I remain of the view that, for the most part, it should be the existing owners of a company – the shareholders and their agents – who should determine future ownership. Here the system appears to have ‘worked’.

However, there is more that can be done to support greater rationality in the conduct of takeovers.  It is why Labour would introduce reforms to ensure that, once announced, takeovers do not generate their own unstoppable momentum – from carpet-baggers buying shares or from advisers who stand to gain from the deal – but are always decided in the long-term interests of the company.  

It is why we will clarify the legal protection boards have to make decisions based on what they think is best for the long-term health of the company, not just on the value of the offer on the table. 

The experience has also confirmed in my mind the need to review the legal framework governing takeovers so that legitimate public interests in exceptional transactions of this kind can be properly taken into account where they are not aligned with private interests. 

Our world-class science base has taken many years, and much public and private investment, to develop. It is from this base that we can secure more of the well-paying jobs that generate broad-based prosperity and a stronger, better balanced economy.  It is a national asset, a public good as critical to our economic future as our physical infrastructure.  So a Labour government would not stand back and allow this source of long-term competitive advantage to be put at risk for narrow, short-term gains. 

That is why we would change the law so that, should the need arise and as a clear signal to all, it is not left unprotected any longer by extending the grounds on which ministers can block a transaction in the public interest to cover exceptional deals which would have a material adverse impact on the UK's science and R&D base.  We would set up a standing body of scientists and business people to provide an independent assessment to Ministers and, if the advice were that the proposed deal would have a material adverse impact, a Labour government would block the transaction.

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So this is the story of how and why we reached the view that the proposed takeover of AstraZeneca deal should be subject to such a public interest test on the grounds that it posed a real risk to our national economic interest. It is the story of how the government misjudged the situation, was seduced into becoming cheerleaders for a deal which ministers mistakenly viewed through a narrow, political lens as an endorsement of their tax policy. It is also about how Labour and others helped energise a broad coalition of voices from across politics, business and science to raise legitimate questions about the deal for the companies involved as well as for Britain.

Before the arrival of the current CEO, Pascal Soriot – a biologist – in 2012, AstraZeneca had been somewhat struggling. Patents on a number of existing drugs were set to lapse and the pipeline of new drugs did not look promising.  But since then, the company’s fortunes have experienced a sea change. Soriot has focused on simplifying the organisation, and as the true potential of its drug pipeline has become apparent its stock has risen in value by 40 per cent in the last six months.

In November 2013 Pfizer’s chairman and chief executive Ian Read made an initial approach to AstraZeneca’s chairman Leif Johansson. Pfizer subsequently made a more formal approach on 5 January 2014, valuing the company at around £60bn. A week later the AstraZeneca board rejected the offer as “very significantly” undervaluing the company, offering too little cash (30 per cent), and being too risky in terms of execution.

Like many, first became aware of Pfizer's courting of AstraZeneca when the original story reporting that approaches had been made appeared in the Sunday Times on 20 April, Easter Sunday.  The significance of this potential transaction was not lost on me.  The £60bn price tag would have made it among the largest transactions in UK corporate history. 

On 26 April, Pfizer made a second approach, which was also rebuffed.  With the deadline imposed by the City Code on Takeover & Mergers fast approaching, Pfizer made two further offers on the weekend of 17 May, eventually valuing the company at almost £70bn in what was a final offer.  Again, these offers were rejected by the AstraZeneca board without reference to shareholders. Under the Code, Pfizer then had until 26 May to 'put up or shut up' with a firm offer.

The significance of the deal went far beyond the price tag. The potential transaction went to the heart of the debate about the quality of jobs in the UK and the need to reform our economy so it is better balanced and more sustainable in the long term.

We must build an economy that gives everyone a ladder up to get on and meet their dreams and aspirations. That is not the kind of economy we have right now. We are a country of great promise with an abundance of talent but our economy is simply not producing enough of the high paid, high skilled jobs to meet those aspirations, raise living standards, and make people's dreams a reality. Of course, any job is better than no job but a good job that is secure and pays a wage you can live on is better still. There are only four other countries in the OECD with a higher share of low-paid jobs. To change this and to generate more, better-paying jobs we must grow our world-leading and innovative sectors, like pharmaceuticals.

When people ask me on the doorstep what we are hoping to do to help their children to go on and do better than the older generations in their family, I want to be able to point to companies like of AstraZeneca as the vehicle through which we can achieve this brighter future. As a company, it accounts for 3 per cent of our manufacturing exports, directly employs around 6,700 people, and supports many more thousands of jobs indirectly through an extensive supply chain. As a share of its overall revenue, in 2013 AstraZeneca spent almost 50 per cent more on research and development than Pfizer.  It is companies like AstraZeneca which will provide the opportunity for our  children – not only to go on and do well for themselves, but to make history playing a part in producing life saving drugs.  So we need a business environment that nurtures more firms like AstraZeneca, not fewer.

When I heard of Pfizer’s approach on Easter Sunday, the fact it was a US company was a complete irrelevance.  Having visited Jaguar Land Rover's Gaydon plant and other foreign owned UK operations, I have seen for myself successful British companies thriving under foreign ownership.  The question was whether the purchase – foreign or otherwise – of AstraZeneca would strengthen the company over the long-term.  Would it help grow our world-leading pharmaceuticals industry and would it expand our research, science and skills base? If not, would it have such a material and adverse impact on our economy that it would necessitate government action to safeguard the national economic interest? These were the questions we sought answers on from scientists, business leaders, and Ministers alike.

Before coming to a view, I spoke to leading people in the sector and British business, including both firms involved with the deal, first Pfizer then AstraZeneca. Ed Miliband and I met Pfizer’s Ian Read after his appearance before the BIS select committee on 13 May and I met AstraZeneca’s Pascal Soriot the day after following his appearance at the Science and Technology select committee.  Industry groups in the pharmaceutical sector were not able to express a public view, given the need to be neutral as regards their members. But privately many expressed concerns to me about what was proposed – nobody positively made the case for the deal to go ahead. 

What perhaps surprised me most were those who would not usually argue for government involvement in the economy who were now vigorously making the case to me that the government should act to safeguard the national economic interest in this case.  Others urging action included the leading businessman and former Science Minister, Lord Sainsbury, who went public with his concerns, as did the former CEO of Standard Chartered Bank, Lord (Mervyn) Davies. Lord Heseltine expressed his reservations too, along with the Chief Executive of Aberdeen Asset Management. 

There has been an attempt by people in government to paint those raising objections as protectionists or advocates of a 1970s style socialism - but this had no credibility given the record of the individuals concerned who were raising the alarm.  They are no more 1970s-style socialists than those advocating a laissez faire approach to the deal are anarchists. The Director General of the British Chambers of Commerce, John Longworth, put it well when he said: “we must remember that there’s a lot more to being an open economy than saying ‘yes’ to every takeover”.

Then there was Pfizer's record of acquiring other companies, intellectually asset-stripping them, cutting R&D spending, and shutting down research facilities with large consequent job losses. This was the experience at Warner-Lambert and Wyeth in the US and at Pharmacia in Sweden since 2000. I know this because during the course of this story, I spoke on the phone with my SPD colleagues in Sweden who outlined to me the devastating impact Pfizer's actions at Pharmacia had had. Despite paying in excess of $200bn for these acquisitions, the entire market valuation of Pfizer now stands at substantially less, suggesting significant value destruction or extraction.  This did not inspire confidence, especially when taken together with Pfizer's actions at its historic research facility in Sandwich, Kent – which developed Viagra - where jobs were cut in 2011.

So the worry in the science and business community in light of all this was for the long term future of the company and the sector. In spite of this, the initial response of the government looked to the short term. It seemed that the prospect of being able to boast of bringing one of the world's largest companies on to the Exchequer's books in the clouded their judgement on the longer-term consequences of the deal.

Sources close to George Osborne had said the bid was "a massive vote of confidence" in the UK and Grant Shapps said the takeover could be "a great Anglo-American tie-up". Treasury Minister David Gauke said the deal showed how, "[t]he UK is now very much top of the list for foreign companies looking to increase their activity in the UK.”

In his eagerness to take ownership of the deal as an endorsement of government policy, the media were briefed that the Prime Minister had appointed Cabinet Secretary Jeremy Heywood and senior Treasury official John Kingman to “negotiate” with Pfizer. In doing so, it both undermined the AstraZeneca board who had so far rebuffed Pfizer and gave the impression that the government were driving the deal. Ed Miliband’s accusation that David Cameron was “cheerleading” for the takeover at PMQs on 7 and 14 May clearly hit home, and this impression was reinforced when AstraZeneca Chairman Leif Johansson was reported to have asked the government to take a more neutral stance.

In seemingly promoting the deal, the government found itself out of step with the business and science communities, and on the wrong side of the argument. Ministers also failed to appreciate the extent to which the desire to use tax inversion in the US was driving the deal – tax inversion being a loop hole in US law where a company can re-incorporate overseas in order to reduce the tax burden on income earned abroad.  Ian Read – who started off in the accounts department at Pfizer – admitted in his evidence to the BIS select committee that one of the principal rationales for the deal was tax planning.  Sir David Barnes, former CEO of AstraZeneca, put it well in an email he sent to myself and the Business Secretary when he said: “whilst all companies should manage their tax affairs efficiently, tax should not be the driving imperative for such a transaction. Whilst there is potential (substantial) tax advantage for Pfizer through tax inversion, that is a narrow basis on which to build an enduring and constructive business partnership”. I had made the same point I had in exchange I had on the deal with the Science Minister David Willetts on the Today Programme.

Pfizer asserted at the Select Committee hearing on 13 May that the US was unlikely to act to end the use of tax inversion. No sooner did they do so than numerous powerful US senators – Democrat and Republican – were demanding action to stop it the day after. Now, Michigan Democrat Senator Carl Levin has introduced a bill to place a moratorium on corporate inversions for two years while the US tax code is reformed.

The 26 May deadline has now passed and AstraZeneca has fought off the current threat from Pfizer. Under the rules, Pfizer will be prevented from making another attempt to buy AstraZeneca for at least another six months.  But others may try before that, and the threat of similar takeovers in the pharmaceuticals sector and elsewhere in the future always remains.

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Britain has benefited enormously from inward investment which – along with the money – has also brought new ideas and ways of working to our shores. We must remain resolutely open to business and as an attractive destination for investment – not as a global tax-avoidance wheeze, but because of the positive benefits we offer innovative companies.

And we must be hard-headed about this. We want to generate the jobs of the future and make the UK an investment destination for all the right reasons. To do this we must continue to invest in our science base, improve our skills base, and develop our innovation eco-system. But if we are making these investments, we must also ensure that the right legal framework exists that can preserve the benefits of these investments – not just for next company passing, but in perpetuity.

Chuka Umunna is Labour MP for Streatham and Chair of the All Party Parliamentary Group on Social Integration.

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Angela Merkel's call for a burqa ban sets a disturbing precedent

The German chancellor's plan for a partial ban of the full-face veil is a clearly political move, which will do more to harm those women who wear it than protect them.

 

In these febrile times, women’s freedom and autonomy has become a bargaining chip in the poker game of public propaganda — and that goes double for brown, Muslim and migrant women. Angela Merkel should know as well as any other female politician how demeaning it is to be treated as if what you wear is more important than what you say and what you do. With the far-right on the rise across Europe, however, the German chancellor has become the latest lawmaker to call for a partial ban on the burqa and niqab.

We are told that this perennial political football is being kicked about in the name of liberating women. It can have nothing to do, of course, with the fact that popular opinion is lurching wildly to the right in western democracies, there’s an election in Germany next year, and Merkel is seen as being too soft on migration after her decision to allow a million Syrian refugees to enter the country last year. She is also somehow blamed for the mob attacks on women in Cologne, which have become a symbol of the threat that immigration poses to white women and, by extension, to white masculinity in Europe. Rape and abuse perpetrated by white Europeans, of course, is not considered a matter for urgent political intervention — nor could it be counted on to win back voters who have turned from Merkel's party to the far-right AFD, which wants to see a national debate on abortion rights and women restricted to their rightful role as mothers and homemakers.

If you’ll allow me to be cynical for a moment, imposing state restrictions on what women may and may not wear in public has not, historically, been a great foundation for feminist liberation. The move is symbolic, not practical. In Britain, where the ban is also being proposed by Ukip the services that actually protect women from domestic violence have been slashed over the past six years — the charity Refuge, the largest provider of domestic violence services in the UK, has seen a reduction in funding across 80% of its service contracts since 2011.

It’s worth noting that even in western countries with sizeable Muslim minorities, the number of women who wear full burqa is vanishingly small. If those women are victims of coercion or domestic violence, banning the burqa in public will not do a thing to make them safer — if anything, it will reduce their ability to leave their homes, isolating them further.

In the wake of the Brexit vote, racist and Islamophobic attacks spiked in the UK. Hate crimes nationally shot up by 42% in the two weeks following the vote on 23 June. Hate crimes against Muslim women increased by over 300%, with visibly Muslim women experiencing 46% of all hate incidents. Instances of headscarves being ripped off have become so common that self-defense videos are being shared online, showing women how to deflect the “hijab grab”. In this context, it is absurd to claim that politicians proposing a burqa ban care about protecting women: the move is transparently designed to placate the very people who are making Muslim women feel unsafe in their own communities.

When politicians talk about banning the burqa, the public hears an attack on all Islamic headscarves — not everyone knows the difference between the hijab, the niqab and the burqa, and not everyone cares. The important thing is that seeing women dressed that way makes some people feel uncomfortable, and desperate politicians are casting about for ways to validate that discomfort.

Women who actually wear the burqa are not invited to speak about their experiences or state their preferences in this debate. On this point, Islamic fundamentalists and panicked western conservatives are in absolute agreement: Muslim women are provocative and deserve to be treated as a threat to masculine pride. They should shut up and let other people decide what’s best for them.

I know Muslim women who regard even the simple hijab as an object of oppression and have sworn never to wear one again. I also know Muslim women who wear headscarves every day as a statement both of faith and of political defiance. There is no neutral fashion option for a woman of Islamic faith — either way, men in positions of power will feel entitled to judge, shame and threaten. Either choice risks provoking anger and violence from someone with an opinion about what your outfit means for them. The important thing is the autonomy that comes with still having a choice.

A law which treats women like children who cannot be trusted to make basic decisions about their bodies and clothing is a sexist law; a law that singles out religious minorities and women of colour as especially unworthy of autonomy is a racist, sexist law. Instituting racist, sexist laws is a good way to win back the votes of racist, sexist people, but, again, a dreadful way of protecting women. In practice, a burqa ban, even the partial version proposed by Merkel which will most likely be hard to enforce under German constitutional law, will directly impact only a few thousand people in the west. Those people are women of colour, many of them immigrants or foreigners, people whose actual lives are already of minimal importance to the state except on an abstract, symbolic level, as the embodiment of a notional threat to white Christian patriarchy. Many believe that France's longstanding burqa ban has increased racial tensions — encapsulated by the image earlier this year of French police surrounding a woman who was just trying to relax with her family on the beach in a burkini. There's definitely male violence at play here, but a different kind — a kind that cannot be mined for political capital, because it comes from the heart of the state.

This has been the case for centuries: long before the US government used the term“Operation Enduring Freedom” to describe the war in Afghanistan, western politicians used the symbolism of the veil to recast the repeated invasion of Middle Eastern nations as a project of feminist liberation. The same colonists who justified the British takeover of Islamic countries abroad were active in the fight to suppress women’s suffrage at home. This is not about freeing women, but about soothing and coddling men’s feelings about women.

The security argument is even more farcical: border guards are already able to strip people of their clothes, underwear and dignity if they get the urge. If a state truly believes that facial coverings are some sort of security threat, it should start by banning beards, but let's be serious, masculinity is fragile enough as it is. If it were less so, we wouldn't have politicians panicking over how to placate the millions of people who view the clothing choices of minority and migrant women as an active identity threat.

Many decent, tolerant people, including feminists, are torn on the issue of the burqa: of course we don't want the state to start policing what women can and can't wear, but isn't the burqa oppressive? Maybe so, but I was not aware of feminism as a movement that demands that all oppressive clothing be subject to police confiscation, unless the Met’s evidence lockers are full of stilettos, girdles and push-up bras. In case you're wondering, yes, I do feel uncomfortable on the rare occasions when I have seen people wearing the full face veil in public. I've spent enough time living with goths and hippies that I've a high tolerance for ersatz fashion choices — but do wonder what their home lives are like and whether they are happy and safe, and that makes me feel anxious. Banning the burqa might make me feel less anxious. It would not, however, improve the lives of the women who actually wear it. That is what matters. My personal feelings as a white woman about how Muslim women choose to dress are, in fact, staggeringly unimportant.

If you think the Burqa is oppressive and offensive, you are perfectly entitled never to wear one. You are not, however, entitled to make that decision for anyone else. Exactly the same principle applies in the interminable battle over women's basic reproductive choices: many people believe that abortion is wrong, sinful and damaging to women. That's okay. I suggest they never have an abortion. What's not okay is taking away that autonomy from others as a cheap ploy for good press coverage in the runup to an election.

This debate has been dragging on for decades, but there's a new urgency to it now, a new danger: we are now in a political climate where the elected leaders of major nations are talking about registries for Muslims and other minorities. Instituting a symbolic ban on religious dress, however extreme, sets a precedent. What comes next? Are we going to ban every form of Islamic headdress? What about the yarmulke, the tichel, the Sikh turban, the rainbow flag? If this is about community cohesion, what will it take to make white conservatives feel “comfortable”? Where does it stop? Whose freedoms are politicians prepared to sacrifice as a sop to a populace made bitter and unpredictable by 30 years of neoliberal incompetence? Where do we draw the line?

We draw it right here, between the state and the autonomy of women, particularly minority and migrant women who are already facing harassment in unprecedented numbers. Whatever you feel about the burqa, it is not the role of government to police what women wear, and doing it has nothing to do with protection. It is chauvinist, it is repressive, it is a deeply disturbing precedent, and it has no place in our public conversation.

 
 
 
 

Laurie Penny is a contributing editor to the New Statesman. She is the author of five books, most recently Unspeakable Things.