LONDON (The Deal) -- U.K. Business Secretary Vince Cable said Tuesday he was working to ensure job and investment commitments made by Pfizer (PFE) in support of its 63.1 billion pound ($106 billion) takeover bid for AstraZeneca (AZN) were legally binding as he left open the option of government intervention in the offer, while warning it was "tricky."
Cable was speaking before a committee of House of Commons lawmakers, who earlier in the day had grilled Pfizer CEO Ian Read about his plans for the unwilling target and heard evidence from AstraZeneca CEO Pascal Soriot.
The offer, which could culminate in the U.K.'s largest ever takeover, has become a lightning rod for concerns that Britain is handing over too much of its industrial base to foreign acquirers. Cable said his government faced a "dilemma" in contemplating such bids.
"We are an open economy. We benefit from it. We don't want to do anything that will disrupt that but there are wider national interests and we want to do our best to protect them," he said.
He said the long gestation period of any bid -- assuming Pfizer opts to proceed by a May 26 Takeover Panel deadline -- would allow plenty of scope for government intervention after the summer break. This would involve secondary rather than primary legislation, he said, and ministers would also work with the Takeover Panel to examine untested powers to ensure bidders' pre-takeover commitments towards their targets are legally binding.
"Our judgment is the existence of the parliamentary recess doesn't impede our freedom to make any action we might make," he said. "If the assurances are not satisfactory then there is the option of legislative remedies."
"There are legal and financial mechanisms I would rather not describe in detail but we are certainly considering a range of ways" to ensure Pfizer sticks to its pre-takeover promises, he added.
He also said the Conservative-Liberal Democrat cabinet was united over how to approach the bid. Last week, Prime Minister David Cameron confirmed he was open to Cable's idea of expanding the government's limited "public interest" powers to examine takeover offers, though Cable conceded on Tuesday that any such intervention would be "quite tricky."
"We work as team. My colleagues have made it very clear that just like me they want the options kept open ... both in terms of securing assurances and potentially of an intervention."
He also said Pfizer commitments made earlier this month in an open letter to David Cameron were "just a starting point."
Read pledged in the letter to put 20% of the combined company's R&D workforce in the U.K. for five years. Giving evidence to lawmakers earlier in the day he would not specify numbers. But he confirmed that the enlarged entity's R&D budget, now $12 billion combined, would fall overall and jobs would go.
As lawmakers criticized Pfizer's track record based on its integration of the Wyeth Pharmaceuticals Inc. and Pharmacia Corp. acquisitions, Read characterized Pfizer as "a high-integrity company focused on patients and on delivering drugs to patients."
He also stressed Pfizer's track record in developing drugs internally. Pointedly, he cited the tax benefits of an AstraZeneca takeover - Pfizer wants to make the U.K. its tax domicile to benefit from the country's lower corporate tax - as only his third reason for seeking the bid. He said his primary motivations were a desire to merge companies with complementary product lines and "a push to become more efficient, to produce more medicines faster."
A precondition of Pfizer's latest stock-and-cash proposal, which was worth 5,000 pence per share as of May 2, was a unanimous recommendation from the AstraZeneca board. Read indicated he was open to removing that provision.
"It would be very remiss of me when I am trying to buy a company to lay out my negotiating strategy. I have options," he said. "If the precondition is not honored, we haven't made a decision what we would do."
He also said any suggestion his company wouldn't buy AstraZeneca without the government's blessing is "not correct" and called the concessions on jobs, investment and AstraZeneca board representation that he offered in the letter to Cameron "unprecedented." Read insisted his pledges are already legally binding.
AstraZeneca on May 2 rejected the proposal and has so far refused to hold discussions.
AstraZeneca shares were up 1.9% at 4,696.50 pence by early afternoon in London. Based on Pfizer's closing price in New York on Monday of $29.13, its latest proposal -- the company's second -- values Astra Zeneca at 4,788 pence.