Inside the world of business

Grounds for optimism despite Pfizer job losses

GIVEN THE scale of the announcement – the loss of up to 785 jobs – the surprise surrounding Pfizer’s restructuring of its manufacturing operations was the relative lack of anger.

Apart from the somewhat hysterical reference by Fine Gael enterprise spokesman Leo Varadkar to “meltdown in the multinational sector”, the focus seemed to be on looking forward rather than bemoaning a decision that had been flagged clearly as far back as Pfizer’s original bid for Wyeth.

Pfizer and Wyeth were among the first US corporates to locate operations here. Between them, they have been major investors in the State, providing skilled employment over many years and upgrading facilities regularly to attract new business.

Tuesday’s news, while regrettable, was inevitable. There was little logic in Pfizer acquiring Wyeth for its presence in biologics only to ignore Wyeth’s Grange Castle campus – one of the largest of its sort worldwide – and continue its own biologics investment in Cork and Dublin.

Equally, with cholesterol drug Lipitor – Pfizer’s biggest earner – coming off patent next year, demand for the product from the Lipitor plant in Loughbeg, Ringaskiddy, was inevitably going to decline.

Even following this news, Pfizer will be one of the largest employers in the State. It signalled in its restructuring announcement that it intends investing more money and hiring more people at Grange Castle, with Ireland continuing to be a centre of excellence in biotechnology for the group.

Importantly, two of the three plants destined for closure have seen significant recent investment to allow biopharmaceutical operations. Even in today’s difficult environment, the Irish life sciences sector saw exports grow 20 per cent last year. With up to four years to find a buyer for these plants, there are grounds for optimism that an existing or incoming biopharma group will preserve some of the 285 jobs involved.

AIB counts cost of M&T cold feet

AN OPPORTUNITY for Allied Irish Banks (AIB) to sell one of three key overseas businesses to hit the Financial Regulator’s capital target of €7.4 billion has passed.

Sovereign Bank, owned by Spain’s Banco Santander, had been in advanced merger discussions with M&T Bank, in which AIB has a 22.5 per cent interest, but talks stalled as M&T got cold feet about the potential marriage.

Santander, which is ploughing a much different furrow from its weaker European rivals, is keen to push into the US market, using Sovereign as a springboard to growth.

The plan, as it was being formulated, would have involved M&T purchasing Sovereign from Santander with the Spanish bank taking a stake in an enlarged M&T. Santander would then have bought AIB’s stake in M&T.

Combining the two banks would have created a new regional banking power in the northeastern US with branches located from Maine to Maryland.

Eamonn Hughes, analyst at Goodbody Stockbrokers, believes that AIB could make €4.7 billion selling its stake in MT, its Polish business BZ WBK and its UK division.

The Sovereign-M&T tie-up would have helped AIB generate some capital, though the bank will still be shy of the regulator’s levels after offloading the overseas assets. This will leave AIB in line for majority State ownership.

M&T is valued at $10.2 billion, leaving AIB’s stake worth about €1.8 billion. The Irish bank’s shareholding is now likely to be sold on the open market.

Santander is also one of the businesses being talked about as a potential suitor of AIB’s UK business along with British bank HSBC and National Australian Bank.

Being poster boys again is the last thing we need

AS THE European Commission breathes ever more heavily down the Government’s neck, Brian Lenihan may take some comfort from an assessment of Irish policies from US financial guru Paul Volcker (82). A former chairman of the Fed and prized adviser to the Obama administration, Volcker on Tuesday said time was “growing short” for the US to solve its financial problems, including its ballooning deficit and its surging social security commitments. Urging the powers that be to get moving before today’s problems become “tomorrow’s existential crises”, Volcker said the US should be more like . . . Ireland.

“In the United States, we don’t seem to me to share the same sense of urgency as countries such as Ireland,” Volcker told a gathering in Stanford, California.

Coming as it does in a week where the Republic managed a successful bond sale in a torrid market while the Spanish almost floundered, the crumb of praise must make some in Kildare Street a warm glow. But let’s hope it doesn’t go to anybody’s head, or, even worse, give rise to a flow of positive comment. The last thing anybody in Government needs at this very delicate time is to think their job is done. And the last thing any of us need – heaven forbid – is a return to our days as the economics poster boy of Europe.


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