>> get set for a grilling. pfizer's chief executive will testify in front of u.k. lawmakers amid plans to sweeten its after zeneca takeover bid. >> socgen sets the bar high. the bank targets higher profits helped by lending in russia and africa. thisill hear from its ceo hour. >> and we speak with the cofounder of skype and the former head of the world bank. we are live at goldman sachs' asset management ideas summit.

hello. welcome to "the pulse," live from bloomberg's european headquarters in london. i am mark barton. >> and i am caroline hyde. >> we begin with our top story. pfizer said to plan a sweet and -- a sweet takeover bid for astrazeneca. westminster is at with more on what we can expect. the countdown continues great -- the countdown continues. >> the countdown continues from that conversation we had earlier with a labour mp. clearly, the ceos are going to face some hostile questions about what their intent is. why are they doing this? are they doing it for tax reasons? there is a different tax regime in the u.k. versus the u.s. or are they doing it because it makes sense for their investors, their boards him a their shareholders, and they want to grow the company here and create jobs?

these are some of the questions that will be posed. the committee starts in about 15, 20 minutes, will go on throughout the afternoon. it is really a question for ian about whether or not he has any allies on the committee or will it be all hostels -- h ostiles? he is going to have a challenging day. >> how does this deal take -- stack up with other takeovers of u.k. companies? >> clearly, it is one of the bigger ones in history. even before the deal has been sweetened, which we are reporting this morning from people familiar with the matter, we are talking about a 60 billion pound deal. all of the ones in recent memory have been below the 20 billion mark. cadbury story, which got so much attention, is about 12 billion. that is why the stakes are much higher. there has not been a deal of

this size. here to talk to me about some of these matters, i am going -- i am joined by dr. roger barker. thank you for joining us. we just heard from the swedish finance minister saying that sweden is basically opposed to this deal. should the u.k. government take a similar approach? the swedish government and a lot of other people, we are skeptical about this deal. we wonder if pfizer is the right stewart for this company. it has a bad record in terms of mergers and acquisitions, in terms of creating value. and you are right, this is a tax-driven transaction. ae key is, who should make decision on this? i do not think it is helpful for politicians to be involved in it should be down to the shareholders of after zeneca and the board of astrazeneca has to think, what is in the best long-term interests of the company? >> there might not be a whole lot if they can avail themselves

of astrazeneca. what should the u.k. government do and should they get involved at that point? the u.k.ing that government should be doing is creating a great infrastructure for research and development in the u.k. by having leading-edge universities, a good regulatory system, a good tax system. a should not be intervening in individual takeover bids like this. they are trying to get a grievance with pfizer, which are essentially worthless and anything can happen. >> so you do not believe any of these assurances that mr. read is making? saying are all proviso, that if circumstances fundamentally changed, then they are no longer valid. circumstances can always change. there is a lot of talk about splitting pfizer into three divisions or three companies in the future. what would happen to the assurances if that occurred? he have to be somewhat skeptical about whether these are binding.

and do we want to combine the companies in this way? they are conditionally holding employment in a country. it is better to make the country as attractive as possible for the company. do want to come here for future investors, even if both parties decide it is not a good outcome. we'll there have already been a chilling effect on investment in the united kingdom based on all of the talk we have been happening -- we have been having the last couple of weeks? >> the u.k. has built a good reputation for being open for investment, open for business. politicians do not attend -- do not intend to get involved. we made those mistakes in the past and we have learned from them. it has implications for investors. if we decide to make an investment in a country and politicians try to step in or discourage the bid, they interfere based on political grounds. who is shouting the loudest?

what are the headlines? which lobby groups are most influential? that is a problem. you politicize these types of deals. we want this to be an environment for investment. >> have they already criticize this deal? >> they have because it is being increasingly politicized. is the number one story from a political perspective. that is dangerous. we have to get back to the situation where the focus is more -- the board of after , have, -- of astrazeneca they got a compelling vision for the company? if that is the case, they have to argue that and persuade their shareholders not to accept the pfizer bid. it is too difficult to persuade the shareholders and the member of -- the members of parliament that will be questioning later this morning. >> politicians have all sorts of other agendas, other constituencies. they are being buffeted by public opinion from the

headlines in newspapers. they do not provide a very rational and objective basis. inhave an economic system the u.k. where directors play a key role and shareholders lay a key role in these transactions. >> we are having this conversation here and it is dominating headlines. donehe damage already been to the investment environment here? >> not yet. the bid has not yet been completely stymied by politicians. -- it isthe debate understandable that there is some debate. there was in sweden when pfizer took over a major company there. it is a controversial issue. but there is still a chance to allow this transaction to take its proper course and be considered as a commercial transaction about a multinational company which is only going to act in its own best interests, at the end of the day.

really, it should be subject to the normal commercial decision-making process. >> can you put a dollar figure or a pound figure or a euro figure on how much investment will be stymied coming into the u.k. if this deal is stanched? >> i cannot put a figure on that. -- thisnot just about relates to all sectors of our economy. if the u.k. government was to step in based on a public interest test in this particular transaction, it will affect potential transactions and investments across all sectors of the economy. that will have a more negative impact on jobs and any jobs that jobs that might be artificially saved by blocking this takeover deal. >> back to you in the studio. we just heard the other view on what the stakes are with the long-term effects for the u.k. economy. nicholswas hans

speaking to dr. roger barker from the institute of directors. ourere is what else is on radar today. rebels in eastern ukraine have asked to join russia after saying its referendum showed support for independence. russia's state-controlled gazprom is running to cut off supply to ukraine unless kiev pays for its gas by june 2. >> and unicredit chief executive says a solution to the crisis is needed to avoid harming business in europe. italian bank is one of the largest in ukraine. >> i hope that, at the end of the day, common sense will prevail on both sides. in the ukraine but also russian investors, european and u.s. .e need to find a solution if we do not find a solution soon, it could impact european business, including europe and russia. >> and former treasury secretary

timothy geithner says the banking system is now safer than in the months ahead of the financial crisis. he talked to charlie rose and said the days of financial panic may not be over. are absolutely vulnerable. if not in this countries, then other countries, the risk of major panic again. it is inherent in the banking system. you cannot prevent it. you can do a lot of things to reduce your vulnerability to it. the reforms we put in place in dodd frank, they are a very powerful set of reforms. >> you can watch that for interview tonight on bloomberg. >> as we head to the break, manus cranny is live from the goldman sachs asset management idea summit. you have some exclusive interviews for us. , caroline.deed joining me in the next 20

minutes, the man who did it twice. he joins us to talk all things tech and disruption very shortly , followed by the chairman of goldman sachs international advisors and the former world bank president. all to come during the next two hours of "the pulse." 2014,rom the ideas summit right in the heart of london. stay with "the pulse" for those exquisite interviews. ♪

>> welcome back to "the pulse." we are live on bloomberg tv, radio, streaming on bloomberg.com, your tablet, your phone, and any windows phone as well. ande focus on russian risk the bank that is most exposed. wrote down its unit in russia. we asked the chief executive how he has adapted. is aat we are experiencing slowdown of the russian economy and the effect of that in our business plan. today is thatying in the central scenario we have, which is that all parties avoid the escalation of the tensions, that effectively yet there is a slowdown but we are able to implement a strategy of growth. the risk in liquidity should lead to a 14% right down in

liquidity in 2014. it is a large, promising market. we confirm our commitment to russia. >> where do you see the red line for european sanctions? >> i do not think in those terms. i think that europe and the world would probably react very was tontly if russia send military troops to ukraine. but as long as it is not the case, and it is not the case guaranteeing the prudence of russia, i do not think the sanctions will be that significant for the russian economy. >> do you keep investing in russia given the current situation? >> i take a long-term perspective. links has very strong with many countries in central and eastern europe. germany, italy. i think that, again, both parties know that they have an

interest to maintain the economic and political elation ship. opportunityuse the if other banks decide to exit from russia? , when there isat a slowdown, or might be less competition. russian banks might have means trouble the a capacity to lend. maybe a different pricing environment. for the time being, we stick to our strategy. maybe there will be some opportunities, but it is too early to say. socgen's chief executive .4%e, shares up about today. >> let's shift gears and talk airlines. thats reported earnings beat analyst expectations. it was still lower than last year. david tweed has been following the story. profit dropped, but it beat expectations.

what is behind this? why are shares doing so well? >> well, it is a story about profitability margins. you are right, the shares are doing well. they are up about five percent. for the year, they are down seven percent, but on the right track. the earnings came in around 10% ahead of consensus estimates. it is because of margins largely at the commercial unit, the unit that makes all of the planes. two-thirds oft airbus units. they have managed to get costs under control for the a380. this is an aircraft that has been weighing on earnings for years. they have added improvements and they have said that they think they will be able to reach break even for the a380 by 2015. that has gone down for the well

as well -- pretty well as well. consensus earnings increasing on the back of this. other good news as well. one of them is the fact that the , the firstbody a350 one is going to be -- is confirmed. they expect to deliver that to of thisrways by the end year. as for the reorganization of the defense and space businesses, that seems to be progressing in line with expectations as well. tom enders saying a strong focus remains on the implementation of various improvement and restructuring plans. back to you. >> thank you very much indeed. it is the biggest bounce in airbus shares since january. losssyjet posted a pretax a little earlier for the first half. it was an improvement on the

year earlier period. earlier, anna spoke to the company's ceo and she discussed the impact on the crisis in ukraine. >> there is no question that u.k. to moscow bookings have been suppressed because of the political situation. for me, a very interesting fact is that 56% originate from moscow, which is very high. our network average is around 25%. knew about easyjet before we opened this route and they flocked to us. >> shares are down five percent. easyjet, at the moment, is not living up to the euphoria we have seen. even though we saw earnings and profitability improve, there was a net loss overall, better than it was this time last year. sales up 6%.

far moreseeing business travelers. this is a stock that has done nominally well over the last few months. perhaps investors wanted to see eerars euphoria -- sh euphoria if they are going to keep piling into this stock. about thiscinating company is some of the novel ways they are trying to cut costs. >> cutting use of paper. >> they want to use ipads or cabinets with in -- or tablets within the cockpit rather than these heavy manuals. it will save about half a million pounds a year. if you cut a kilo out of the plane, you save $20,000 a year. amazing amount. just by taking things off the edges. taking the next technological leap, they are looking at drones, 3-d glasses. the drones are set to analyze damage. we are likely to see damage, maybe like lightning strikes a plane today. bodyant to see whether the

of the aircraft has been hurt. grounded for is about 24 hours. if you can get a drone, you can assess the damage faster, less disruption, less cost in terms of the company. it is amazing. 3-d glasses help people on the ground see what an engineer or a pilot is seeing as well. interesting things they are trying to do. this is a company trying to drive forward. carolyn mccall looking to see -- >> she says they are only scratching the surface at the moment. they are making very stealthy progress. >> we have harriet green a little bit later, another female chief executive. she is also a fervent believer in technological development as well. later in the hour, we will be speaking to the ceo of travel giant. >> now let's get some company news. here is what is happening today. >> at&t is said to be in talks

to buy directv for about $50 billion. the deal would give at&t access to the largest u.s. satellite tv provider to combine with its wireless phone and internet services. those familiar with negotiations say the deal is more than a week from being completed. >> considering matching or exceeding telefonica's offer. dts, the broadcaster owned by silvio berlusconi, already has a large stake. is worth 700 25 million euros. >> and citizens financial has filed for a $100 million ipo in new york. the proceeds would go to rbs. the eventual size of the share sale may change. >> stay with us on "the pulse." ♪

>> it is time for a look at today's hotshots. top divers from around the world took a terrifying plunge to compete in the red bull cliff diving world series. gold aldridge won the medal and 60,000 spectators came out to watch the action. bikers battled the elements in round two of the supercross world cup in the netherlands. the race completed some impressive jumps in the slippery conditions with an australian

writer taking first place. >> let's take a look at how european markets are trading. jonathan ferro, you have got more. can we hold onto the six-year high. >> it looks like we can. since 1999.en the rally continues in london. the equity markets, big trading in the u.s. u.s. retail sales looking for .4% on the month. if you are looking for swedish krona, we talked a lot about it. what you are seeing is deflation snapback. will it stay that way? bnp paribas says the race is still on. they are looking for 1.15. >> thank you. several come, after setbacks, the tel aviv stock exchange is getting a strategy shakeup. we speak with the new ceo in his

first international tv interview. ♪

"> an welcome back to "the pulse live on bloomberg. >> our top headlines. new data from china shows the economic slowdown is healing. retail sales slowed for april. there is a risk of china missing their goals of growth. russia's state-controlled gas

is threatening to cut off gas supplies to ukraine unless kiev pays for its gas by june 2. >> timothy geithner says that united states banks are safer now than they were before the financial crisis. vulnerable if not in this country or other countries to the risk of another panic again. it is inherent in the financial system. you can't eliminate it or prevent it. to can do a lot of things reduce your vulnerability and the reforms to put in in. frank, they are a powerful set of reforms against that basic risk. >> he writes about his experience writing -- working under president obama. you can see that whole interview tonight on bloomberg. trading volumes were down and

the chief executive both resigned. it now has a new boss. he gave his first international tv interview with our middle east editor. >> we look for companies that are pre-'nasdaq stage. to create a package for them and bring the listings up. rating will go up as a result. on the trading side, we want to mimic what the world is doing. trading are not done by the same entity. the tel aviv stock exchange does all three. >> you would like to get israeli companies traded in germany. >> as a result of that, once or we canull trading, create that afterward.

it represents israeli technology much better. will have morees and more trading. >> we mentioned companies with a market value. there are a whole host of israeli companies listed in the united states that are worth that amount or less. how do you persuade them to give the market where most of their customers are and list here instead? >> if a company feels comfortable because the tech system is there and they get a better valuation, they should go where they get a better valuation or they are more comfortable. -- wherever they go public, we want them to go to israel. there is other market segment that we are neglecting a bit.

that is corporate debt. there is an active market in israel that can be expanded. we want foreign companies to come here to raise money. >> people would suggest that one of the main reasons things plunged in tel aviv was the failure of the tel aviv stock market to be accepted in the europe benchmark. do you have plans to revisit that and get israel incorporated western mark --? >> they go to their constituents and asked them if israel should be in europe or not. we plan to go to the same constituents and market the fact are these israeli companies better for european investors. israeli banks are undervalued. they represent an opportunity for european investors to come

and invest. man, you were a betting what would you rate your chances of getting tel aviv integrated into the european benchmark? what timescale? >> in the next six months we will make a huge effort to do this. thee can get to constituents that make the decision, we try to market to them. if we can compete in the european basketball tournament and when it a few times, our economy should be part of europe. >> you have been in your job for six months. five months. if we come back in 18 months or --, hows time thomas would we decide if you have been successful? would 25% be a success? how do we gauge success? >> my dream for the next five

, i want 100 new companies and i think volumes can increase double. if i have done that, i am a very happy man. the stock would be a little bit slower because it takes time to initiative -- initiate. i am very confident that if we can create a listing product with the right size and the right market and start trading other things that are not necessarily listed here in the traditional way, we will see increases in volume. >> that was our middle east editor. and a sparkling ceremony last was crownedet green businesswoman of the year. it is the oscar for female business leaders worldwide.

i am delighted to say that she joins us here live now. some fascinating views and things have been said about you in the past. called the you chairman of thomas cook and said you were perfect for the role and could turn the company around. you have. what has been the most important key attribute? >> i have done transformations on four different continents. you need lots of focus in terms of stamina. i have both. early andgive up too you have to have everybody buy-in. you have to start building a niche. >> how is the transformation process going? you are quite early in this ross s. it is a multiyear process. tell us what you can. >> we are 21 months in.

i think we are making strong progress. at the time when we started this work, the market was 146 million british pounds. we let the strategy deliver. billion of new money. now our market cap is around 2.6 billion. there really delivering things our customers want. we have better products. we are not done. you are absolutely right. we are making progress. >> many will make much of the woman, whatu are a do you feel about diversity in general? this is about nationality as well. all companies in the u k and everywhere are enhancing their

diversification. >> for me the critical reason that diversity is so important is if you have people of different ethnicities and backgrounds you get different views that reflect your etc.mers, your owners, all of my direct reports were male and all were british or german. aw i have six ethnicities and third are all women. i like to get different views and different backgrounds and different experiences. ithink groupthink, whether is the group of women just like me or a group of man, is not good. to get people all going in one direction. i really believe in diversity. does it matter to you? thesehink things like

awards are so important. femalere so few positive role models running businesses in the media. every time i am given an opportunity to talk about this, we want young women to stop thinking about their gps ease. we want them to think about writing and influence people. they can travel the world and run businesses and tell what to do and by high shoes. school withime in the boys and girls to talk about running businesses and why it is fun, it is time we see other professions like broadcasting or doctors and lawyers where you see a stronger for liberation between the genders. >> is their optimism?

i sense that in the generation is a thinkolds there -- thought of starting their own business. do you get a sense that the u.k. is harnessing its entrepreneur rism? when there are 20,000 people going for two graduate placements, the ones that did not get that are still stellar candidates. what do they do? last night at the awards there newan award for entrepreneurs. the three finalists were so inspiring. they are creating food products. business.reating a

there was a male business. vibrant, talented women. i feel the optimism. we are making progress of women on ord's. ards. we are making progress. it needs to become just like anything. you have to embed it. you have to make it the new normal. it is perfectly fine that regardless of your age, sex, sexuality, if you are good you will get on. >> we are talking about the takeover.strazeneca what is the fine line between wanting investment within the economy and meddling to protect? how is that fine line? >> it is a very fine line.

i have no political expertise at all. for me it is often about what the end is in mind. in this situation, it is jobs. to be able to create meaningful skillsross a wide range and roles. interests arerm not being subjugated to the short-term interests, i think that crosses a line. data and information is probably a good thing that people are asking questions and going into detail. you always need facts and you're not going to get all the facts you need just by what is transmitted out there. i think it is very challenging. there is so much history. what acquisitions have worked well?

where have jobs been created? this is a very particular industry. we are notnt, setting up downstairs and veryting with these two significant companies. it is long-term and jobs. it is getting big data and small data. >> give us a cent job market in the u.k. are there any countries you could look to to improve its growth trajectory question mark --? >> i think there are many. we are clearly in a stronger position. customers,suming there is still some caution. they are more upbeat. they are clearly thinking about the range. the world is a smaller place.

everything you is for the price you clearly see. the majority of vacations indicate people are still carefully watching their budgets. i think it is too early to declare victory. there are very positive signs. >> can we talk about russia? tell us what you can say. business in russia is better than planned. do you still stand by that? will the business be affected if the problems in ukraine escalate? >> our business was not in good shape. it is in much better shape. nowou know, there are

people who are encouraged not to travel. they serve the government or they support services. the russians have been great travelers. we are seeing less travel from the russians. russia is one of the most popular destinations for incoming chinese to europe. we are seeing that slow a little bit. there is some caution. we will see how about some fold. will ensuestability from any reasons. >> fascinating talking to. thank you and congratulations for winning the award. a wonderful trophy. i did have a couple of glasses of champagne. >> thank you very much. p."his is "the pulse

the cofounder of skype is coming up next. ♪

>> welcome back. let's get back to our top story. pfizer is planning a sweetened takeover bid for astrazeneca. they are appearing before u.k.

lawmakers this morning. we have more on what to expect. they are set to begin speaking very soon. >> he is set to begin very soon. clearly he is going to get some hostile questioning. you get a sense of the tone on the committee. the labor unions are going first. if they are talking about the burden of proof. what assurances can he make the jobs will stay in the united kingdom? the realcking up reasons for pfizer doing this. do they see new research and development coming down the pipeline? we have had some interesting developments. the finance minister of sweden is genuinely opposed to the idea. he thinks the burden should be on what sort assurances pfizer

astrazeneca astrazeneca will give to to keep jobs in the u.k.. is going to increase their bid. it is going to be a slight increase. they may increase their bid after the hearing is over. we will get to another round of potential rejection from astrazeneca. we need to see the number and we ian to see if even read -- reed can convince parliament. >> he does not want to make this a hostile takeover. he does not want to go to the shareholders. tell us how this deal stacks up. of the sumsn terms we are talking. these numbers for forever thing else we have seen in the u.k. is a 60d a scene

billion pound deal. wound up coming in around 12 billion pounds. this is six times bigger. the numbers are massive. what they will do to keep jobs here in the united kingdom a. there are assurances that are meeting a skeptical audience. they have to make sure that they get a return on what would be a sizable investment. outsidenichols parliament. >> we are going to bring you live pictures from the pfizer testimony in the next hour. ♪

>> will come back to "the pulse ." we are streaming on your tablet and phone. >> we are looking at germany's largest utility by market value. dropped and revenue is reduced. they are shifting toward renewable. there is a surge in wind and solar generation. that is an effect to cut power

prices. they have reiterated their outlook for 2014. their chief executive says they are reducing their debt. they are reducing their costs without neglecting investments in their future. >> shares are off by 1.7%. seenis a company that has some the settlement as late. >> they are posting the first annual loss since germany founded in 1949. >> for those listening on a bloomberg radio, the first word is up next. for our viewers, the second hour of "the pulse" is coming up. have live pictures from outside westminster.

hans nichols is there to talk about the grilling that the pfizer ceo will get. up.e have got it all coming stay with us. ♪

>> get set for a grilling. the is if plans to sweden -- sweetened the astrazeneca takeover. we speak to the former head of the world bank. we are live from the goldman sachs ideas seminar. >> good morning to our viewers in new york city.

welcome to those just waking up in the united states. pulse" live.he >> this is the latest investor confidence. investor asked dictations are 33. >> it is well below expectations. the future views of the business leaders in germany are clearly pessimistic. >> there are concerns about russia and ukraine. people are worried about ukraine and russia. that spills over. people become more pessimistic about china and the like. >> let's see how the euro is responding to this. it is slightly lower.

everybody is keeping an eye on the euro. be -- whates would would be taken next month. >> let's get back to the top story. pfizer is said to be giving a sweetened takeover bid for astrazeneca. both companies are set to go in front of u.k. lawmakers. hans nichols is live from westminster. what can we expect from the hearing itself? hostility,xpect skepticism. this is the landscape that the ceo will face. the leaders of unions are still up. there is still skepticism about this deal. we talked to an mp who is on the committee. we talked about the burden of for theirg on pfizer

assurances the jobs will stay in the united kingdom and the takeover is not about more favorable u.k. tax properties and laws. pays 20%.a is going tof proof ed to explain why he is doing it. this is the why question. what is his intent? look for hard questions on that subject. >> he is speaking right now. let's cross over to the testimony right now. speaking as i talk. i laid out four principles. sciencet was

innovation. the first priority was to get our science productive. that is what counts. that is our future. was let's treat the company's money as our own. let's make sure that we get good capital allocations. let's make sure we are good stewards of the resources we have. to reestablish our reputation in the general public. we wanted to regain trust. the fourth writer artie was to build a culture of ownership. business. the i feel very proud of our howlings. your words are very good.

you havelast two years run a number of companies. $240 billion on acquisitions. at $185pany is valued billion. workforcelashed the by over 60,000. reduced research and development by half. if sustained this would be somewhere around 12 early in dollars. are you prepared to say that you will sustain research and development to that level? >> may i address some of the

comments you made? the company is focused on making science productive. has gone through a series of consolidations. alone in having reduced employment in the industry. we are focused on trying to make the company more productive. valuey is asking for more in their medicines. there are several ways of doing it. one is making research and development work better. this is what we are trying to do. we are working inside and outside the laboratory. we want to reduce costs of bringing a product to market. >> i asked a simple question. could you give a yes or no answer? >> i will get there.

you mentioned the number. that does not include a few things. $165 billion in cash to ourselves -- shells. businessesd some that were valued for over $50 billion. it is a partial story. >> my question was are you prepared to sustain the level of research and development budget at the level it is jointly between pfizer and astrazeneca at this moment? percentage,ot the it is how productive it is. i do not expect the combined

total wrote -- will remain the same. i cannot give you a figure on that. >> you expected to be lower. that is very straightforward. thank you for that. you don't appear to have had any consultations with the trade unions. we know the you have had consultations with the city investors. we know you have communicated with government. have you had any communications with the scientific community in this country? >> we have a dialogue. theave 300 partnerships in scientific community in the u.k. like the royals society? >> it is more individual

scientists. i would like to make a point on the labor unions. we are in an extraordinary situation. we have a proposal with astrazeneca. we don't have a deal. we are talking to you in front of a deal. we have had limited conversations with astrazeneca. i thought it was inappropriate to go behind their management and talk to their labor union. we will talk if this deal progresses. we will talk to the labor unions. we will talk extensively to the scientific community. that is why we are here this week and we will remain here this week to do so. appear that you have had extensive conversations with your investors. you had consultations with the government. you highlighted the tax advantages for pfizer.

are those your priorities as opposed to the scientific community? clear thatwe made it there are three reasons for what he to do this. one is to merge the pipelines. research is risky. believe pfizer astrazeneca pipeline that would blend well with astrazeneca pipeline. have oncology products and they have some products that combine worry -- very well with ours. there is a strong industrial rationale on the products. the second part of the value creation is this push to become the quicker we

,an get medicines to patients the more productive we can be and the more successful the industry will be. a lower taxrt is rate and a more flexible use. >> your strategy so far seems to have been concentrated on the area see you have traditionally value to ther, investor rather than developing the scientific race. acquisition,id the we brought 13 products to market. we've been very productive in our science. we have increased vaccines.

are insurance companies. >> i think we are well aware of the market. we don't need a lecture on that. you cap your research and development. one of the accusations that has been leveled is that you concentrate more on marketing than research. >> you talked about the importance of finishing this deal. potential for the research going forward. this is the last aurora of the business model. -- hurrah of the business model.

the industry is becoming more tailored and smaller and nimbler. what do you say to that argument question mark --? the big pharma business model is not stable. >> i see it in different terms. there is consolidation going on in the industry. we demand more productivity. is organized is with a focus on science. we have great expertise. we have two scientific offices for those areas. is way we run pfizer accountability and groups of people with responsibilities in certain areas. there is a lot of accountability. the way we are going is the way

modern pharmaceuticals are going. small units that are accountable. we have lots of contacts in the universities. substantial agreements with universities in the united states to do early research. ask for a proposal from each university. they have to have a scientist. wehave 300 proposals and fund the 16 of them. we will spend $7 billion on r&d. small companies cannot spend that. >> a lot of our development is in terms of going out and buying products.

over 50% of our late stage development is done in-house. the early stage is more like 70%. i am very proud of the commitment to science in our company. buyingare talking about a company partly because of its stage. we want to integrate that into our scientific commitment. inefore arriving brian before you took over, the research was $12 billion. these are very similar figures. would you anticipate it being reduced to $7 billion in the

future? when we purchased that the combined r&d was $11 billion. that is a significant amount of money. the $11 billion goes to $10 billion because of the investments we've made. those in andof $1 billion. by what we did is we looked at those areas where we believed we could bring the most value to patients. we did notreas where believe we could bring value to patients. we were focused on those where we believed we could. the 7 billion dollars of r&d that we are investing today is

much more of. we created 13 new drugs since that acquisition. >> that is been said before. we don't need to say it again. you have been with the company 35 years. >> i started in the accounting area. would have been an excellent salesman. swedishote the experience to you? you talked about how you invested in other companies. ratherdish experience is concerning. you can understand why people are concerned.

when the prime minister of sweden said that following the the company, they have had a negative experience. it makes us feel great concern for jobs and resources for research. does that bother you? answer my question. does that bother you question mark --? >> i am worried that the facts are right. researchers in45 sweden. they had artie spun off their research division. >> stop. should i repeat the promises? itre were promises that would be to jobs and operations in sweden. they were not honored.

do you mind addressing that? >> we were going to build a factory. it was conditional on a product being approved. the product never got product approval and we never build the factory. 30% was decided by pharmacy management before we bought them. that we can be proud. concerned that you are concerned if you broke your promise. >> i don't believe we didn't break our promise. when we did not have the product, we could not build the factory. >> you include as a precondition the unanimous recommendations by the board of directors of astrazeneca to vote in favor of

the combination. if you don't get that unanimous recommendation, will you give up on this? you don't talk about spending this much money and not know what your options are. tell me the truth. company,rying to buy a i don't want to lay out my negotiating strategy. i have options. i have not made any decisions. >> if you don't get your precondition, your stated precondition, will you walk away from the deal if that is not met? >> my answer is i have not made that decision. >> but you already made the precondition. >> we would like it to be honored. we have not made a decision on what we will do. >> thank you very much. is that correct?

>> i don't think that is correct. we had discussions with the u.k. government when we first decided to approach astrazeneca. the government made clear its concerns. we made commitments that are unprecedented. i don't think any company has made these prior to acquisition. just to clarify, it does not matter what the u.k. government thinks. it you would do it anyway? >> we want to come where we are welcome. we want to operate in the appropriate laws of the united

kingdom. >> what you've outlined so far today, why should the u.k. government look favorably? we look at asset management, pfizer has a reputation for being ruthless. we are seeing a potential reduction in employment. why would we look favorably? this is an opportunity to domicile the largest pharmaceutical company in the world. this brings our financial strength into the united kingdom and globally. and willstrengthen strengthen the scientific base in the united kingdom if a

company of our sizes make a commitment. it would strengthen it by reducing. >> we made a commitment to include globally. we may reduce the combined budget globally. i would not say in which companies where we would reduce it. global r&d headcount kobe in the united kingdom. has any other company made that commitment? was therlier question combined budgets of astrazeneca and pfizer would not be reduced as a result of this takeover. can you just clarify that? >> our commitment is to 20% of our global r&d numbers will be

in the united kingdom. >> you're not making that commitment in this country? 20% of r&d will be in the united kingdom. >> i want figures of investment in research and development in this country. >> i can't make any commitment about spending country by country right now. whatnot even aware of plans are in the u.k.. we have not had conversations. once the deal is completed, we will look at the totals and decide where is the best place. the united kingdom has a great science infrastructure. you paint a picture of a very

big company. reed testifying. he is finding it having -- difficult answering some of the more direct questions. why does pfizer want astrazeneca ? many feel this is just a tax question. >> i think it is definitely both of them. does have a strong cancer drug pipeline. that is one thing they are looking at. the numbers are huge. pfizer has built up $70 billion. they are trying to see if they

can have a lower rate of taxes on that. one of the biggest deals in pharma last year enabled them to move their headquarters to ireland. u.s. companies have done this and are looking at doing more and more. may sweeten its offer for a second time. >> that is what our sources are telling us. they may not sweden the cash offer much more. will probably structure it so that there is more cash on the table. if you look at astrazeneca shares, they are trading lower. they're not looking at too much of increase in the cash. >> they're looking at their options as to whether they can go. there is so much political opposition to it.

that might be tricky. >> thank you for sticking around with this. we will be back in a couple of minutes. ♪

-- welcome mac to back to "the pulse." >> china's economic slowdown is deepening. growth in retail sales is slowed for april. china may miss its expansion goals of seven percent. >> there is support for independence in ukraine.

is threatening to pay off gas to ukraine unless kiev pays off what it knows. with charlierview rose, the former check to terri says wetary of treasury are still vulnerable. >> there is a risk of a major panic again. it is inherent in the financial system. you can't ban it. do a lot of things to reduce your vulnerability to it. reforms we put in place are a very horrible set of reforms against that risk. >> he writes about his experiences working under president obama. you can watch that later on tonight. >> jonathan ferro has more.

we are at a six-year high on a 1999ocks. this is high. the stocks keep on rallying. saw growth onles the month. i want to talk about the euro. there, that dip right german expectations gave a big drop. one is russia and the other is china. we have talked a lot about what might happen next month. we have not talked to have -- have the other central banks will respond. the bank of england may be more cautious. this may drop in the next three months. the ideas summit is here in

london. manus cranny is at the event speaking with chief executives and policymakers. he joins us now. you have another exclusive lined up. >> we have. is the chairman of golden's -- goldman sachs. it is great to have you with us this morning. out from the first part of the conference. you said something that is important. we have noteform focused enough on. >> there are two intersecting trends going on. one is the recovery from the recession. people are looking at the possibility of the exit strategy. around the world, you

can see the critical importance of the structural forms and future growth. if you take the monetary policy, we have had some extraordinary actions that dampen interest rates and increase asset values. can those valuations be supported by the real economy? that is a question of productivity and growth and national economies. >> who is leading the charge in that structural reform in your perspective? i am talking about the europeans. >> spain has made some very significant reforms. you have seen the cut in employment costs. it improves its export position. one of the challenges is to sustain the politics of reform. in spain, markets a been of value weighted positively. italy has been on the sidelines. a france is critically important

for the future of the eurozone. this is than one of the issues that has bedeviled the government. britain has been a good growth story. -- progress.oud if you think about the huge changes in energy and some of the software innovations in biotechnology, the government sector has not taken the reforms. >> i want to take is to china. the leadership change came in. far isenure of power so about social change and change of economics. what is your take as someone of great insight? >> i think would people in the miss is individual data points or this policy or that policy. of view of china,

this is the future of the government. looked at thee end of the soviet union. gorbachev does not come out as a hero. they have consolidated power on standing and committee. is how he will use that not only in terms of things like the anticorruption campaign but how this will drive economic reform going forward. what is important here is the structural theme. have a 10 year term. what they have put in place with it is aparty reform, question of what will be the structure in the future? to put this in their

perspective, they would like to be the third in line. mao consolidated the country. a new structure for the future would be his legacy. up in how he manages growth in the next five years. what is the growth strategy? it is tied up with the currency. is a big portion of his legacy westmark --? >> going back to this point of structure, in the past we used to break the system and rebuild. we can no longer do that. they are focusing on things like the revenue relations between the provincial and central government. the role of markets. the open capital accounts you have.

tax reform issues. a big one will be pollution. issues are antal question of ultimately political legitimacy. they are going to remove government approvals over things like licensing and creating an economic area where they have overused commodities. they have had a big stimulus program. that left a legacy in terms of bad debts. they have over building in some of the medium-sized cities. they will not rush to do bailouts or stimulus programs. the politics will mean they will have to do some of that. eyes are on long-term structural reform. the third arrow is not about

the minute shove two percent. for the prime minister, he is concerned about japan's future influence in the region and globally. that means you have to get growth going again. in a country where you are losing 250,000 people year, how can you rebuild the labor force westmark --? you are seeing an emphasis on the role of women for the first time. the swedish finance industry they would increase japanese gdp by eight percent. part of it is removing the governments overbearing weight in areas and opening up some of

the sectors like energy. part of it is the true laborationalization of force and foreign direct investment. we will see whether japan is able to make some progress. >> we are going to have to leave it there. enjoy the rest of the day at the conference. thank you very much for giving us your time this morning. it is amazing the insight, isn't it? back to you. cranny with a great interview there. >> let's go back to the big story of the day. the testimony taken place within parliament. ceo has been testifying before lawmakers. hans nichols is not outside.

that's go straight to the hearing. weight. he is outside. we been watching this for about 45 minutes. your earlyough ceo is doingow the under these conditions. good morning again. he not consult with the unions are earlier when they were thinking about this bid for astrazeneca? it would notwas have been appropriate to contact the unions before a deal was finalized. that gives you a sense of the kind of hostile questions he is receiving from both conservatives and labor members of the committee. they are questioning his intent. that is the core of this.

are they doing this because they want to invest in britain? are they doing this because of ?he tax regime in the u.k. difference,ssive especially when we're talking about the revenue that could be coming in through this combined group. pounds is the price tag we have on this. there is talk of raising it. they will see how this committee hearing goes before they make an additional increase to the offer. >> thanks a lot. you had better go back in. the focus is on how much r&d spending will remain in the u.k.. this is getting pretty heated. let's get back into it. we are talking about --

>> you thought you would cut to support that with greater efficiency. it normally means jobs are going somewhere. is there any way that you can tell us in overall terms what that means? increases inious company size made a reduction in the number of jobs. that is the major area of cut. bei am not saying we can more efficient without reducing jobs. orannot tell you how much how many or where. this is a global enterprise. we will look at this as a global combined footprint. we will make decisions to get those efficiencies.

i have some idea of the percent of efficiencies we would look for. those are premature to talk about when we are negotiating with astrazeneca. we do not have an offer agreed upon. terms?eneral >> there will be some jobs cut somewhere, that is part of being more efficient. >> you can become more productive as well. can i just pursue one or two points? you have been unwilling to give detailed figures on tax savings. the figure that i have seen make 1.4is you will billion pounds.

is that in the right sort of area? ottowa to comment on someone else's amount. when you look at the transaction, there are three areas of value. what a strategic, one is operational, and one is financial. there is a significant tax element. that is part of our thought process. i would've assumed that given the significance of this takeover, you would've done detailed analysis of the potential tax benefits from it. you are unwilling to diebold should -- dibold

vulge the tax benefits if this merger goes through. i also just asked you in terms of your taxation for the british reportsns, i've seen that you did not pay any tax in 2012. another report i have seen more tax that you made credits.opment tax over 400 million pounds in u.k. taxes. that includes employee withholding taxes. in 2000 13d taxes and 2012 and 2011. is that a net contribution to the government after the tax

credit? >> that is what we have actually paid in terms of cash. it is cash payment. >> you might benefit more? >> we spend a lot on r&d in the u.k. a reduction in the overall tax code. the numbers i gave you, i think those are cash payments. is not an r&d expense. could you outline, where with the tax benefits to the british economy, from this merger? >> they come from two parts.

wouldy in the companies provide more products to sell. tax incomegenerate rat in the u.k.. utilize the patent box, which is very attractive, the revenue would accrue in the treasury as well. that, youn interpret expect profits to rise. >> i would expect that that is correct. i would expect that as we take of a clever strategy on the part of the u.k. government to say that if you and youn the u.k.

manufacture in the u.k., it is subject to a tax of 10%. that is attractive to a lot of global companies. be an expansion and the corporation tax. that would be at least in part mitigated by the patent box procedure. because of the patent box, there are incremental taxes. this is bringing in manufacturing that would not have come here without the patent box. >> it might be done under astrazeneca independently. >> it might happen. it is not incremental to the merger. in -- it will be

incremental in the sense that there will be more in the patent box. are back to the level of expenditure on research and development. ofback to the productivity research and development. products. isthe number of products likely to depend in part on the level of research and development. >> there is very little evidence spent isount of money a correlation to productivity. productivity is having your research in really good scientific centers like we have in cambridge, massachusetts. i am straining to the area that the committee will want to address tomorrow.

have tostanding is you research your r&d and you have a reduction in the number of new products coming out. >> we have 300 products in our pipeline. we have been very productive post the acquisition. we have increased in areas of vaccines. .e have a vaccine this is a scourge. >> i want to go into the scientific benefit. we talked with the acquisition. what has worked and not work so well? i think that is been very

successful. we brought in a lot of raw talent. we were a small molecule company. research is in large molecules. of the twoation companies and two focuses have been incredibly successful. we have done some smaller acquisitions. i would like to have a 100% track record. >> let's hear about what you think has gone wrong. >> attica has been any material acquisition. a jointtried to do

venture with an indian company that did not go very well. we are trying to do a deal in brazil. we have done a very good deal in china. no acquisitions of gone badly? went badly.n india the one in brazil we still need to see. went the whole, it extremely well. some of the other acquisitions well.e done i think our track record over the last several years has been very good. >> which ones of gone wrong in your opinion? arehe ones i just mentioned the ones i think went right. refocus on the issue

of taxation? , in taxationou terms, who is getting more? or thetish taxpayer pfizer shareholder? the benefit long-term for this will be the ability to invest in research and grow a company. it will be both. it will be the taxpayer and the shareholders. that theink contribution and taxes will exceed that of -- >> hans nichols is outside. >> give us a perspective. some of the key takeaways are going to be the fact that r&d

spending will be last -- less. jobs will be lost. >> it is hard to talk around that for him. you see the difficult position he is in. he is defending a deal that has not been finalized. he is hamstrung by laying out a lot of strategy. that can affect his negotiating. he is in a difficult position. he simply has had to say i can't comment on that. they want a firm assurance on where jobs will be cut. he can't make those assurances. he can't make that until the have a final deal. he has a difficult couple of hours ahead of them. we will see if they think they have done much to convince the public that this merger is in their best interest. it is an interesting day here. we will see what happens later

on when we get the industry leader. is what you are going to see labor exploit. they look for what is a potentially good campaign issue. >> thank you very much. i know you'll be live out there listening with great intent to the rest of discussion. it is fascinating how heated it is become. is on the charm offensive. now it is getting pretty brutal. >> when you are being grilled by again, you can't reply. you haven't seen it the documents to make the decision. they are locked in a stalemate. >> it is very difficult. shares are up by

9/10 of a percent. they are below the 50 pound price. >> thank you for being with us. ♪

>> this is bloomberg "surveillance." >> people's republic and eastern ukraine in some form make a russian union. the stock market surges to

record highs. a market priced to perfection? the new neutral. bill gross stock ships on the view from 35,000 feet. fromifts from the view 35,000 feet. good morning, everyone. it is bloomberg "surveillance." i am tom keene. joining me is adam johnson and scarlet fu. starting with china. the numbersking at right here, the celebrating output and retail sales. big the question, how is china going to deal with it? front and center. a lot of talk about shadow banking. just the plain economic aid of slowing down. here is what we have. small business optimism index. gdp issix percent of consumer spending. are we spending? import prices at