Government’s hands tied in Astra takeover

Professor Christopher Bovis
Professor Christopher Bovis
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THE Government would find it very difficult to establish a “strategic interest” in the planned tie-up of AstraZeneca and Pfizer, according to a leading Yorkshire academic.

Professor Christopher Bovis, a professor of international and European business law at Hull University Business School, said the UK had let the global market deal with issues such as consolidation and movement.

David Cameron yesterday insisted US pharmaceutical giant Pfizer must provide more assurances about its commitment to Britain amid concerns over its takeover bid for AstraZeneca.

The Prime Minister said the UK “benefits massively” from foreign investment, and warned that the row must not trigger a retreat to protectionism. But he indicated the American firm had yet to convince him that the purchase would be in the national interest.

Answering questions in the Commons, Mr Cameron said the commitments made so far – including retaining at least 20 per cent of the research and development workforce in the UK – were “encouraging”. “Let me be absolutely clear, I’m not satisfied, I want more. But the way to get more is to engage, not to stand up and play party politics,” he said.

“The more we can do to strengthen the assurances the better.”

AstraZeneca has so far resisted approaches from its rival, but executives have not given up hope of completing a £60bn-plus deal – potentially the biggest ever foreign takeover of a British company.

Fears have been raised that resulting cost-cutting could cause the loss of thousands of highly-skilled jobs and undermine the UK’s science base. Mr Cameron dismissed suggestions from Labour leader Ed Miliband that he was “cheerleading” for the deal by asking the Cabinet Secretary and ministers to discuss the situation with both companies.

He said he agreed with the position taken by Liberal Democrat Business Secretary Vince Cable, who refused yesterday to rule out intervening to block a formal bid. When asked if the deal could be prohibited by the UK Government on grounds of strategic interest, Professor Bovis said: “No. As the law stands, it will be contrary to EU law and UK law on fundamental freedoms of capital, services and right of establishment. It will be also contrary to WTO law.

“The UK Government does not have any jurisdiction in the corporate dimension of the deal. However, recent experience in EU member states portrays a different picture.”

For example, he cited the German ‘Volkswagen law’, a specific legislative framework which prohibits any foreign – non EU – undertaking to increase its stake for more than 25 per cent of the voting share capital.

He added: “In essence, foreign hostile takeovers are a rare phenomenon in Germany. In France, golden shares allow the government to control certain industrial sectors, such as energy.”

Trudy Feaster-Gee, a partner at Walker Morris, said: “There is precedent for changing the grounds for intervention under domestic UK merger law. Under the Enterprise Act 2002, the Secretary of State can intervene in a UK merger raising specified public interest issues.”

Margaret Thatcher’s former chief Press secretary Sir Bernard Ingham, said the Government had to “weigh up the national interest” when considering the proposed deal.