Another day, another onslaught of Pfizer-AstraZeneca news. We admit to a slight case of Pfizer Pfatigue, and if yesterday's web traffic is any guide, readers are similarly afflicted. Worse, with Parliamentary hearings the development du jour, today's news is about one-fourth fact and three-fourths rhetoric.
But the $100 billion-plus merger proposal is massive, with enormous potential side effects, so even the rhetoric is worth consideration. Here are the highlights, from hints of a new bid to Pfizer CEO Ian Read's purported reassurances to U.S. lawmakers' heightened job worries.
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AstraZeneca CEO Pascal Soriot admits that he and the board would be obliged to consider a Pfizer offer, provided it's "compelling" rather than "opportunistic," as AZ deemed the most recent £50 per share bid. "It's impossible to say we would never accept any offer," Soriot told the U.K. lawmakers during today's hearing (as quoted by Reuters). Report
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Pfizer ($PFE) is hinting at a better offer, if AstraZeneca ($AZN) does agree to come to the table--"optimal deal terms" being the operating phrase. Analysts, deal-watchers and secret sources figure on a slight bump in per-share price, with a larger chunk in cash. Word is that Pfizer would put a sweetened offer forward first, and go hostile second. Release
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Money aside, Soriot wasn't above a few tugs on the heartstrings. A Pfizer merger would be a major distraction, downshifting R&D into low gear, he argued. "What will we tell the person whose father died from lung cancer because one of our medicines was delayed because our companies were involved in saving taxes or saving costs?" he asked. What indeed. Report
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And here's some deal psychology for you: According to Bloomberg sources, Pfizer is worried that it's losing deal momentum, what with all the hue and cry over job losses and stalled science. After the hearings--and the reaction to the hearings--Pfizer plans to take the temperature of investors and go from there. Report
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All those job-and-research promises Pfizer CEO Ian Read is making? Just trust him. He'll stick to them. "I'm a man of my word," he said during today's hearing, adding that Pfizer is "a company of high integrity." We can hear the snickers now, but let's assume that's true, and recap those promises: a., keeping 20% of the combined company's research staff in the U.K.; b., keeping a factory in Macclesfield, England, where union workers are livid about the potential merger; and c., completing AZ's new research center in Cambridge. For 5 years. Unless circumstances change significantly. Read set out other details in a missive to Prime Minister David Cameron. Letter
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No illusions, though. "There will be jobs cuts somewhere," Read said. And no promises on the number of R&D jobs the Pfizer-AZ combo would maintain. After all, one justification for the deal is cutting out overlap and its attendant costs. The 20% R&D staff commitment is a great offer, Read insists, with a sort of take-it-or-leave-it tone. Report
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The tax element of the deal--which involves Pfizer moving its official domicile to England to cut its tax costs--isn't popular in the U.K. or the U.S. In the U.K., it signals that AstraZeneca's allure is as much about financial engineering as it is about the company's pipeline or assets--which puts Pfizer's commitment to U.K. operations in doubt, or so the idea goes. In the U.S., lawmakers are put out by the potential loss of Pfizer tax revenue. Report
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Actually, Read said, the U.K. should be thanking him for the opportunity to welcome Pfizer to the official roster of British companies. And then there's the tax revenue. More thanks due for that. Report
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Soriot took advantage of that negative vibe during the committee hearing today: It will hurt our image, he said. "The proposed tax inversion structure, we are afraid, could generate substantial controversy and potentially delay this merger and potentially impact the reputation of our company," he said (as quoted by Reuters). Somehow we don't think that this is what's keeping Soriot up at night. Report
- Then there's the worry that the U.S. would be the loser, employment-wise, what with Pfizer promising all those jobs to the U.K. Don't expect promises in the States, Read suggested in letters to two concerned Democratic governors. It's "premature to speculate" about job losses in any given state, the letter says. "I can tell you that Pfizer ... will continue to have a significant number of employees in the U.S., " Read wrote, by way of reassurance. Feeling better yet? U.S. lawmakers aren't either. Report
Special Reports: Top 10 pharma companies by 2013 revenue - Pfizer - AstraZeneca