We all enjoy a laugh and comedy can be black. Films like Fargo, Shallow Grave and Grosse Pointe Blank are dark, yet funny. At the same time, millions of viewers also regularly enjoy home video entertainment shows, laughing along as real people injure themselves in unfortunate accidents or plain recklessness. Reality can be more entertaining, not just stranger, than fiction and the current attempt by US pharmaceutical giant Pfizer to force a hostile takeover of British company AstraZeneca is packed with punch lines and has all the makings of a black comedy classic.
We open on an animated scene in Westminster. News of Pfizer’s desire to acquire Britain’s second largest pharmaceutical company is reverberating along the political corridors. AstraZeneca is an extremely valuable company to the UK and its economy - tax-, job-, skill- and innovation-wise. Politicians, and just about everyone else, are raising concerns about the move; these include job losses, a reduction to the UK’s science base and a detrimental effect on drug research in what would be the largest ever foreign takeover of a British company.
Why are they so exercised? Simple: this is a remake and they’ve all seen the original. To fully appreciate the bleak hilarity of this blockbuster, let’s revisit the first installment in the franchise, the hostile takeover of Cadbury by Kraft in 2010. A similar case and a perfect illustration of perverse comedy in the world of big business, the story is truly sidesplitting at points, for those with a macabre sense of humour.
Many of the concerns voiced about the proposed Pfizer/AZ takeover were raised at the time Kraft first moved to buy Cadbury. Despite assurances made by Kraft prior to the purchase, jobs were lost, aspects of production shifted abroad, the Somerdale factory closed and control of the company moved to Switzerland, thus depriving the Treasury of millions in corporation tax.
A beautiful twist to the chocolate tale was worked in via the funding of the takeover. RBS, a bank 84% owned by the British taxpayer, actually funded the multi-billion pound loan to Kraft for the hostile takeover, and at a time when many British businesses were struggling to obtain credit following the 2008 crash. British taxpayers effectively funding a foreign takeover of a British business and opening the door for the subsequent job losses added an ingenious dimension to the action.
The remake has been spiced up using a different vehicle: by adding an exploration of the complex world of modern international business. There is unease not just in the UK about the tax and employment consequences of the takeover proceeding, but also in America. Two US politicians, Democrat congressman John Delaney from Maryland and Democrat senator Tom Carper of Delaware, whose states each have large AZ workforces, have also entered the argument with concerns that their employees may suffer as a result of closures, while others are vexed that the US will lose out on tax revenues; one of the motivations for the takeover is so Pfizer can take advantage of the considerably lower rate of corporation tax offered in the UK.
Truly great story lines have multi-layered plots, subplots, strong characters and plenty of twists, and neither version of this tale disappoints. Pfizer CEO Ian Read yesterday faced his first grilling by two separate UK parliamentary committees regarding the company’s record of job cuts following previous acquisitions, tax and on other assurances he has made. Before the session even started that morning, Pfizer made the aggressive move of bypassing the AZ board to go directly to its shareholders, then stated AZ would face ‘challenges’ if it remains independent. The tension mounts.
Read’s responses to the committee were as predictable as they were unconvincing. Main highlights included that Pfizer will pursue a takeover with or without government approval, Read using ‘when’ instead of ‘if ‘ when referring to the deal; less than convincing responses when probed about the binding nature of assurances given, which would be subject to the company’s other obligations to its ‘fiduciary rights’; there would be job cuts of an unknown nature; he is a man of his word.
Business secretary Vince Cable and AstraZeneca CEO Pascal Soriot, among others, joined Read in answering questions about jobs, tax, research and development. The stakes have been upped this time due to the scale and potential ramifications of this deal.
In short, the ability of the government to pursue Pfizer if it reneges on any deals or to hold it to account in any way looks dubious at best. Apart from admitting AZ paid no corporation tax last year due to losses and R&D spend, Pascal Soriot made all the right noises about being committed to jobs and research in the UK; after all, it would only be a continuation of the company’s current position. He was also anxious about a takeover seriously disrupting valuable R&D work to the detriment of patients.
The original was full of similar twists and villains, too. The Kraft CEO responsible for enacting the Cadbury takeover, Irene Rosenfeld, was summoned to appear before a House of Common’s committee for Business, Innovation and Skills to answer questions regarding Kraft’s reneging on promises not to cut jobs or close the Cadbury factory in Somerdale. She didn’t even turn up in person, sending four representatives instead, plus she’s been held up as a terrible example of corporate excess over her generous and unreflective-of-performance pay rises: a true modern-day super-villain.
So, Read has made assurances about Pfizer’s commitment to British jobs, completing AZ’s new research centre in Cambridge, retaining a factory in the northwest of England and locating a fifth of its research staff in Britain for at least five years being legally binding if the deal goes ahead. US politicians are now seeking the same reassurances for their workers and investigating the relocation of companies abroad for tax purposes.
We’ve seen this theme before, but it’s really being developed this time around. Will the producers maintain this element of brazen, immediate deception, or just wait five years until the guarantees’ lifetime has elapsed before steaming ahead on those fronts? Five years does not recognise the true timescale of drug development anyway. One could argue that this introduces a further element of suspense, but having seen how well riding roughshod over agreements worked the first time round, it does feel as if there is a sense of inevitability about the outcome there. The parliamentary committee today sounded less than convinced about their being watertight.
So, the scene is set for a familiar but revamped production: nobody likes the proposed takeover, from AstraZeneca and its employees to UK and US politicians, from the Wellcome Trust to the general public. True to the genre, it’s only Pfizer and AstraZeneca shareholders who are keen for it to go ahead. Under British takeover rules, Pfizer has until the 26th of May to make a firm bid.
One of the unusual aspects of this franchise is the absence of a hero. Vince Cable, a vocal opponent of the Kraft/Cadbury affair, or AZ CEO Pascal Soriot who vehemently opposes the takeover, are the hot contenders to assume that role should it appear in the remake. Cable sounded rather like he had his hands tied but he may pull something out of the bag; they’d have to perform some pretty superhuman feats to win the day, though.
The next committee meets today to hear science minister David Willetts and the two CEOs again. Whatever the final outcome, it doesn’t seem likely that the story line will deviate too far from the overarching theme of this corporate saga; that these days big business will usually do what it wants regardless of objections and assurances, and governments seem less able, or maybe willing, to overrule it and its interests.
Gordon Brown, prime minister at the time of the Kraft/Cadbury affair, summed it up beautifully when answering a parliamentary question from Nick Clegg on the RBS funding issue in 2010. An actor probably best remembered for his sharp wit and impeccable comic timing, this is Brown at his best: “If you are really suggesting that the government can step in and avoid a takeover that is taking place in this country and just do it overnight, and then tell a bank that it has got to deprive a particular company by government diktat, then your liberal principles seem to have gone to the wall.” Quite.