AstraZeneca knows there is no room for sentiment as Pfizer circles
If you ask a globe-trotting chief executive like Pascal Soriot of AstraZeneca where is home, he points to Sydney, where his grandchildren are, not Paris, where he was born and studied. The subtext is: look forward, not back. The next generation decides domicile more so than the hand of history.
Where does that leave a company like AstraZeneca, the pharmaceuticals giant with decades of heritage and investment in Britain, which is under siege from larger rival Pfizer? The sweetened, then quickly rejected, £63bn proposed takeover would break records. Despite the keening of some politicians and science luminaries, I believe a deal at a higher price will happen.
No company has a divine right to exist because it has an illustrious history. In recent years, AstraZeneca’s record hasn’t been that illustrious either, as it failed to replace several blockbuster drugs that went off patent.
But just as Mr Soriot has plotted a path to growing its turnover again with some promising cancer drugs in the pipeline, whether the company has a future rests with shareholders, who must decide whether cash and shares today compensate them sufficiently for who knows what tomorrow.
Such crystal-ball gazing decides where headquarters lie. No crystal ball is required to divine that Pfizer is a ruthless integrator of businesses. Investors still rejoice at how efficient it was in merging Warner Lambert after acquiring the American business in 2000. We saw at first hand how dispassionately it can close facilities after the sell-off of its historic Kent campus was announced three years ago. Even better, take a look at what happened in Uppsala, the university town an hour’s drive from Stockholm. Once the base for Swedish drugs giant Pharmacia, bought by Pfizer in 2002, now there is little evidence of it after assets were sold and manufacturing relocated.
Pfizer’s chief executive Ian Read yesterday sent an impressive list of pledges to David Cameron, covering British jobs, research and manufacturing for the next five years. Should the deal go through, it must be hoped that Pfizer has a better record in keeping its word than Kraft, which pledged to keep open a Cadbury factory in Bristol that had been slated for closure, only to proceed with shutting it soon after the ink had dried on its takeover.
Mr Soriot knows only too well that home is where the heart is but, in business, that sentiment is always overruled by the head.
Nissan shows fight to stay in Europe is a rocky road
I spent Monday morning at the offices of the City law firm Clifford Chance chairing an event for TheCityUK, the umbrella body that promotes Britain’s financial and professional services. Three pieces of research were unveiled to add weight to the argument that Britain is better off in Europe than out, assessed from economic, legal and business perspectives.
Concerns that the City would suffer from uncertainty, reduced market access and a loss of influence if Britain withdrew are well rehearsed. The legal paper argued that where we are involved in developing new regulations, Britain is adept at getting its own way. That is true in relation to the Market Abuse Directive, but hasn’t been the case with attempts to overhaul a short-selling ban or block a financial transactions tax. And for all the consensus in the room, bosses see Ukip riding high in the polls and realise they have to do more to sell the merits of Europe to the electorate.
An anecdote from Michael Moore, Nick Clegg’s European business affairs adviser, shows the scale of the challenge. On a recent trip to the Nissan factory in Tyne and Wear, he found that workers were no more pro-European than the man on the street. And this from a factory where about 70 per cent of the cars rolling off the production line are left-hand drive and heading straight to the Continent.
Sir Win’s watchdog job should be easy after Lloyds
As well as speaking at TheCityUK event, Sir Win Bischoff, the chairman of the organisation’s advisory council, took over the reins at the Financial Reporting Council from Baroness Hogg this week.
The FRC was tidied up on her watch. A federation of committees emerging from industry self-regulation were blended under a single umbrella to regulate the accountancy profession and also set the corporate governance code for British boardrooms.
It might not be as busy as the early months of chairing Lloyds Banking Group, but Sir Win insists there is plenty to do. Getting investors including sovereign wealth funds to sign up to a stewardship code to aid their engagement with companies has proved slow going. Sir Win is confident it will get better, not least because the International Forum of Sovereign Wealth Funds is moving its main base to London from premises at the International Monetary Fund in Washington DC.
The trouble with corralling shareholders in London’s blue-chip companies to do anything – such as repel a takeover offer – is that they are so diverse. More than 50 per cent of the shares in UK plc are owned from overseas. Sir Win thinks it’s a greater proportion in Germany and France.
Also in his in-tray is simplifying companies’ annual reports, specifically when explaining executive pay and the runic tables of data on salary, short-term bonuses and long-term incentive plans. If Sir Win can help to lead Lloyds back from the brink, this should be a doddle.
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