Government looks to Takeover Panel for Pfizer five year "lock"
One of the most telling attacks on the possibility of a deal between Pfizer and AstraZeneca is that any pledges on jobs and research made by the US drugs giant are "not worth the paper they are written on".
The shadow business secretary, Chuka Ummuna, has deployed the point regularly, everywhere from the floor of the House of Commons to Question Time.
With few direct powers to intervene, Number 10 and the Treasury have been working urgently on a way of cutting off the line of attack.
I am told they are now coalescing around the powers of the Takeover Panel which is able to scrutinize the details of any deal for up to five years following completion.
The move comes ahead of a major week in the progression of the deal. Ian Read, the Pfizer chief executive, arrived in the UK tonight in readiness for his appearance before the Business Select Committee on Tuesday and the Science Select Committee on Wednesday.
Mr Read will argue during his session - which starts at 10am - that his letter to the prime minister detailing a series of pledges on research and development spending, science facilities in Cambridge and manufacturing in Macclesfield is indeed worth the paper it is written on. To prove it, the letter will be made part of the offer document that will make up the AstraZeneca deal.
By making it part of the offer document, the government believes that "legally binding" does have some force. It was the Takeover Panel that censured Kraft for its failure to honour commitments to the Somerdale factory it made during its purchase of Cadbury.
Is a Takeover Panel censure any more than a slap on the wrist? The government, if it makes the panel the final arbiter (and it is only one option being looked at), will say that it is.
The panel statement's on Kraft in 2010 led to the resignation of the organisation's new director general, Peter Kiernan, who had advised US confectionary giant on its £11.6bn hostile bid.
Sources close to the panel also said that any banker advising on the deal would be professionally damaged by any censure.
Pfizer itself would also be weakened, and the move could haunt any future takeover bids elsewhere in the world.
Mr Read will say he has legal opinion that reinforces the position. He will also argue that the exceptional circumstances sentence in the letter to the prime minister, suggesting that the pledges could change, would only be used in extremis.
And by that he appears to mean if the deal does not go through in the first place, for example because of regulatory hurdles.
As well as the issue of making the pledges "binding", the government has also been looking for more concrete promises from Pfizer.
Here, they may hit more reluctance. Mr Read is likely to make the point on Tuesday that without actually being able to see AstraZeneca's books it is difficult for the company to go any further.
Although some have been demanding 10 year commitments, Pfizer is highly reluctant to go so far in an industry which is notoriously difficult to forecast.
What will be clear from Mr Read is that he is here to face his critics. Unlike Irene Rosenfeld, the chief executive of Kraft who refused to appear before Parliamentary Select Committees while the Cadbury deal was in play, Mr Read has decided that being here is better than not.
He will meet Ed Miliband, the leader of the opposition, to make his case after the two missed each other during Mr Read's first visit to the UK two weeks ago.
On that occasion it seems Pfizer did offer a meeting but was rebuffed. This time there will be no such confusion, although Labour has made it clear it is not at all keen on the deal.
Sources at the Business Select Committee have also told me there will be three key areas where Mr Read will be questioned tomorrow morning:
- Why should Pfizer's promises be believed when critics say it has wrung value out of takeover targets in the past through cost cutting and job losses?
- What is legally binding about any of the promises, given that there is a caveat that if circumstances change the pledges may fall?
- It is clear that the deal could bestow considerable tax advantages on Pfizer. But what will the British tax payer gain from the deal?
There will also be one key question for Vince Cable, the Business Secretary, who appears after Mr Read at 1pm: Is he considering a broader public interest defence when it comes to foreign takeovers, and if not, why not?
Given that this will be the first time many of the British public will see either Mr Read or Pascale Soriot, the AstraZeneca chief executive who is also giving evidence, there will certainly be plenty of meaty issues to chew over once the sessions are completed.