Miliband writes to Cameron – and says “we need to look again” at takeovers

Speaking on Marr this morning, Ed Miliband said that he’d be writing to David Cameron about the Pfizer/AstraZeneca takeover. The letter – published below – suggests that Miliband wants a stronger public interest test for takeovers in future:

Dear Prime Minister

I’m writing regarding the ongoing bid for AstraZeneca by Pfizer. This bid raises serious questions about a key sector of our economy. I know we share a commitment to the UK’s retaining it’s leading global role in pharmaceuticals and wanted to put in writing my concerns with this bid. I also wanted to propose areas on which we could work together to strengthen the oversight of takeovers involving UK firms and to suggest a stronger role by the UK government in this particular bid.

We all recognise that takeovers are an essential part of a functioning economy and can lead to greater efficiencies and better services for consumers. However we also all recognise that too often in recent years major takeovers have failed to deliver the promised benefits.

In this particular bid the stakes could not be much higher. Pfizer’s bid for AstraZeneca affects one of the UK’s most significant investors in R&D, a major contributor to our science base, and 6,700 high quality jobs in the UK. Despite those high stakes, the impression created in recent days has been of a Government cheerleading for this deal on the basis of a short letter with inadequate assurances.

I am strongly of the view that, when it comes to such a strategically important part of UK PLC, we need a more substantive assessment of whether this takeover is in the national economic interest before the UK government allows itself to be seen to be supporting it.

There are reasons to think that such an assessment would be of value. Firstly the company’s track record in the UK raises concerns, including their decision in 2012 to close down the world-renowned R&D facility in Sandwich, leading to the loss of 1,500 jobs. Secondly AstraZeneca currently spends a significantly higher proportion of its turnover on R&D than Pfizer – a crucial concern given the importance of pharmaceutical investment in R&D to the UK science base. Lastly there are concerns about Pfizer’s wider track record regarding the impact on research of previous takeovers.

For the future this case strengthens the view I have expressed in the past that we need to look again at the UK’s takeover regime. In particular there should be a stronger public interest test which encompasses cases such as these where strategic elements of our science base, with impacts well beyond the firm concerned, are involved. Should you wish to make changes to that effect the Labour Party will support you to make them happen.

However, more immediately we need to act swiftly in the case of this specific bid. I have seen the assurances you have received from Pfizer, but this merger would have an impact for decades to come, so it is not enough to have a few specific promises that only last for the next few years.

I note that you have opened up dialogue with the company about this bid and, while noting that this is a decision for the shareholders concerned, responded positively to the outcome of those discussions. I would hope that such a position, allowing the UK Government to be seen as cheerleading for the bid, would only have been taken on the basis of a thorough assessment of whether this bid is in Britain’s national economic interest. If you already have such an assessment I would be grateful for it to be made public to inform those taking this decision. If you do not have detailed advice of that sort I would call on you to put in place an immediate independent assessment to ensure that the implications for our national economic interest are fully discussed. Such an assessment would provide elements of the transparency and information that a wider public interest test would involve. ‎It would also be in Pfizer’s interest if their commitment to the UK’s science base is as strong as they insist. And it is only after such an assessment has been made that a British Prime Minister should decide whether to support such a bid – not by staging quick backroom conversations with one party to a deal.

Ed Miliband