LONDON – Pfizer Inc.’s chief executive acknowledged Tuesday that a potential merger with AstraZeneca would lead to job losses — but promised to keep key research jobs in Britain as part of its $106 billion takeover bid.
CEO Ian Read refused to give specifics on where the cuts might take place as he testified before Parliament’s Business Innovation and Skills Committee but described them as an inevitable outcome of the merger. Still he told skeptical lawmakers the company would honour its promises to keep 20 per cent of its global research and development workforce in the U.K.
“There will be some job cuts somewhere, that’s part of being more efficient,” he said. “Whereabouts in the world I cannot say.”
The U.S. drugmaker has sought in writing to ease worries that British jobs will be lost and research undermined by the transaction — concerns that have made the takeover politically fraught. Critics on the committee, however, repeatedly attacked what they described as Pfizer’s ruthless track record, accusing the company of buying foreign firms and then downsizing.
Amid heated questioning, Read was forced to place his personal honour — and that of Pfizer — on the table.
“We are a highly ethical company,” he said. “We keep our promises.”
AstraZeneca has rebuffed three approaches since January, saying Pfizer’s last offer undervalues the company.
AstraZeneca’s CEO Pascal Soriot, a biologist by training, stressed that a takeover would disrupt its work on a potentially lucrative pipeline of new drugs. He also called the five-year time window offered by the Pfizer commitments too short.
“From the lab to the patient takes many years,” Soriot said, stressing that people who are sick would prefer that the company make drugs rather than fight takeover bids. “It’s a question of avoiding distraction.”
The deal would be the largest-ever foreign takeover of a British company. It’s politically charged because it revives memories of when American food giant Kraft abandoned job pledges after its takeover of Cadbury in 2010.
Unions are particularly angry, in part because Pfizer said the commitments are made with the assumption that circumstances won’t change “significantly.”
“You don’t really buy a second-hand car if the guy says ‘I’m giving you a guarantee but, hey, if things change the guarantees are null and void,'” GMB national officer Allan Black said.
Pfizer tried another strategy after its failure to persuade AstraZeneca’s board, reaching out directly to stockholders and saying in a statement it “remains disappointed at the lack of engagement by the AstraZeneca Board.”
Besides promises on jobs, Pfizer has promised to complete AstraZeneca’s research and development hub in Cambridge and to establish the new company’s tax residence in England.
Pfizer, the maker of Viagra, has also written to Prime Minister David Cameron to underscore its commitments. Business Secretary Vince Cable, a member of Britain’s coalition government, described the letter as “a basis for negotiation” and not an offer that the government has accepted.
Any breach of commitments made during the bid could eventually be the subject of legal action by the Takeover Panel.
The potential deal comes amid a spate of mergers among pharmaceutical companies who are seeking to find new ways to grow as generic drugmakers move in to make cheaper versions of products with expiring patents.