I admit it. When I first heard that Pfizer had made a move to take over AstraZeneca, I did feel a small burst of satisfaction as I realised that I had paid less for something than it was worth. Since that naïve, short-sighted and selfish reaction I have come to see the error of my ways and I apologise.
Ok, irony aside, the discourse of the last few weeks has been interesting to follow and will probably make a great case study for business students—the ritualistic phases of the takeover process have been played out on a massive scale and all that remains is for the bid to go fully hostile, which no doubt it will in due course. I won’t repeat the various stages of the courtship to date, because you can read about this in painful detail elsewhere, but I will mention a few lowlights from the grandstanding at Tuesday’s grand political inquisitions.
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Adrian Bailey, Labour Chairman of the Business Select Committee, put it to Ian Read that Pfizer had been described as a “praying mantis” and a “shark that needs feeding”, both textbook sound bites and gratuitous insults. The praying mantis description was, I think, first used with reference to PFE by Sir David Barnes, AZN’s former chief executive. How can anyone respond to this?
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Pascal Soriot, AZN’s French chief executive, absurdly suggested that the distraction of this bid might cost lives due to the delays it caused to drug development, a suggestion that was obediently picked up by the BBC. If this happens, in even the smallest way, then Soriot is not doing his job either in terms of making sure his scientists were working in their laboratories, rather than sitting in front of Bloomberg, or in terms of doing his best for shareholders, which does involve listening to any offers for the company.
- There was a continual focus on potential job losses. Where were the politicians this time last year when AZN announced 2,300 sales and administration job cuts and 1,600 research and development cuts? There have already been 11,000 job losses at AstraZeneca in the last two years. Soriot will need no lessons from the praying mantis on this front. I blame Kraft, and its cynical breaking of its promises after the Cadbury takeover, for this.
One point that has irritated me is that, if AstraZeneca is so important to the national interest, then why does the country not have a golden share? It does have this for BAE Systems and Rolls-Royce and so, as everyone knows about this, then the price of these companies reflects their reduced takeover availability. But this new practise of politicians popping-up with a secret golden share, after a bid has been made, is annoying. In which other companies does the governement have a secret golden share? If AstraZeneca is even more fundamental to the national interest than BAE or RR, something that I would find very difficult to believe, then the company should be nationalised. Otherwise, why not back-off and let the private sector go about its business?
Secondly, how British is AstraZeneca exactly? It was created in a merger between Swedish and British entities, is run by a Frenchman and chaired by a Swede. According to figures I saw cited by Francis Brooke, of Troy Asset Management, just 11% of its global workforce of 52,000 and about 20% of its 9,000 research posts are located in the UK. Of the drugs of interest to Pfizer, how many originated in a British laboratory and how many were acquired? MediImmune, Astra’s wholly-owned subsidiary responsible for much of its customised treatment development, is based in Maryland US. Oh, and just to muddy the waters further, Ian Read, the shark’s boss, is actually Scottish.
Rather than engage in ludicrous theatre, such as we saw on Tuesday, surely it would be better if the politicians spent their considerable energies in correctly determining what is in the national interest and then drafting their takeover rules accordingly, rather than seizing on events and chasing microphones. All that this inverted McCarthyism and name-calling does is frighten away potential foreign investment and create a culture that demonises business.
It will be fascinating to see how this story ends. Personally, I don’t mind whether Astra is taken over or not; the drug prospects look promising (at last) and, if they do eventually get to market, then patients and shareholders will benefit in due course. If the board recommends a bid, then I will be in favour, and if it doesn’t, then I probably won’t.
Disclosure: Long AZN.
Disclaimer: This post is not a recommendation to either buy or sell. Please consult your investment advisor.