COMMENT : Why French bird in the hand is hard to reject

"Cleaning out the stables is only half the battle. Finding a way forward is the other half"

For Stuart Wallis, chief executive of Fisons, there was always a danger that the long-rumoured bid would emerge before he managed to establish the company with a credible strategy for the future. So it has proved with the hostile pounds 1.7bn offer from Rhone-Poulenc Rorer. When Mr Wallis took over a year ago, Fisons was a company for which it was hard to see a place in the fast-changing world of pharmaceuticals. Too small to justify its substantial and largely undirected research and development facility, it was also too large for the role of niche player. Financially, moreover, the company was slipping into the sea.

The first part of Mr Wallis's brief, to turn the company round and clean it up, is now largely over. Most of the R&D operation and peripheral operations have been sold, production facilities rationalised, and the cost base has been stripped to the bone. With the sale of scientific instruments, the process of transformation will be complete. Already, the achievement is impressive. Even before yesterday's bid, Fisons was one of the year's best-performing shares; the title of "Britain's worst-managed company" with which Fisons was branded a little while back, could hardly seem more inappropriate.

As all chief executives know, however, cleaning out the stables is only half the battle. Finding a way forward is the other half. As things stand, the future continues to look grim.

Patents are expiring, and while the life of some of these products might be extended by the development of enhanced delivery systems, the core business at Fisons is a mature and declining one. Mr Wallis never misses an opportunity to talk about the huge range of opportunities for alliances, link-ups and even full-scale mergers that exist in this industry. However, so far nothing has materialised. Talks with Medeva, one of the most obvious merger candidates and an obvious fit, came to naught. The prospect of finding and cementing the sort of tie-ups that would guarantee a sparkling future within the 60-day timetable of a bid, look remote.

Rhone-Poulenc, moreover, has more reason than most to buy Fisons outright given its existing strength in the respiratory field. The two companies also know each other relatively well through a number of well-established joint venture arrangements. Though Mr Wallis seems intent on fighting to the bitter end, persuading Rhone to up its offer a little may be the better policy. White knights may be hard to come by - three of the most obvious candidates, Astra, Glaxo and Schering-Plough, already have their own competing products either on the market or near to launch. Getting investors to accept his vision of the future may prove equally difficult for Mr Wallis.

Though earnings will rise steeply next year to put an exit multiple of around 16 on the shares - admittedly way below the norm for this sector - this may well mark the high point for Fisons given its declining revenue base. Mr Wallis has developed a good following in the City, but the bird in the hand is always a hard option to reject. In the absence of a white knight, Fisons is going to find it hard to convince investors it is worth much more than Rhone-Poulenc is offering. In France, the fear is that Rhone is overpaying.

A bad week for the private investor

It has not been a good week for the cause of the private investor. The Stock Exchange finally abandoned the rule that obliges a set proportion of all new issues to be reserved for the small shareholder while Crest, the electronic share settlement system to be introduced next year, announced a tariff structure that increases the costs of small transactions.

The effect of both moves is more symbolic than real. The new Crest tariffs make small transactions only marginally more expensive; nor was the Initial Public Offering rule doing much to expand share ownership.

Nonetheless, the impression is of a City that is giving up on the ideal of a share-owning democracy.

To assuage its conscience, the exchange has set up a committee under the City financier, Sir Mark Weinberg, to explore ways of making the private shareholding horse not only come to the water and drink, but keep coming back for more. This is easier said than done, as Sir Mark will tell anyone who cares to listen.

No European country has done more than Britain to trumpet the values of individual share ownership but it doesn't appear to have done any good. Even the privatisation give-aways seem only temporarily to have halted the trend of long-term decline.

Though the number of people holding shares has gone up, the proportion of shares held by private investors has fallen massively. In 1981, 28 per cent of the total value of UK quoted shares was held by individuals. Today, the proportion is down to 18 per cent.

Of those that bought in the privatisations, most took their profits and never returned. It is one thing to be spoon-fed a hyped, sure-bet privatisation stock; quite another to have the confidence to pick one's way through jungles of financial data to bet on a winner. Many people find this daunting, despite the fact that execution-only fees are down to rock bottom.

Instead, the vast majority have taken the easy route of having the choices and the portolio spread decided for them. The explosive growth in unit- linked forms of saving and investment is now the bedrock on which Britain's equity culture is founded. It constitutes a massive public commitment to the equity markets which sets Britain apart from its big continental European partners, and it is a thoroughly modern form of share-owning culture.

There is, however, something unsettling in the thought of an equity environment completely controlled by institutions. Indirect democracy is not the same as the real thing. The recent run of healthily rumbustious AGMs demonstrated that. For this reason above all, Sir Mark's quest deserves every encouragement.

Tomkins' power play backfires in City

When is a share buy-back not a share buyback? When it is announced by Tomkins, the industrial conglomerate, seems to be the answer.

Having announced that it is seeking powers to buy back up to 10 per cent of its shares, Tomkins then went out of its way to explain that it actually has no intention of exercising these powers.

In fact, Tomkins insists, it would not be advantageous to indulge in such an exercise because the money is needed to develop businesses and make acquisitions. Now if the rules were as they are in the United States, where shares can be bought back and kept in Treasury to be issued later if need arises, that would be different.

But they are not; in Britain shares bought back must be cancelled. So if Tomkins has no intention of actually launching a buy-back, why is it seeking powers for one? Just in case, seems to be the answer. Small wonder that dealers are confused.

Start your day with The Independent, sign up for daily news emails
Life and Style
tech
Arts and Entertainment
Rocky road: Dwayne Johnson and Carla Gugino play an estranged husband and wife in 'San Andreas'
filmReview: In the face of all-round devastation, even Dwayne 'The Rock' Johnson appears a little puny
News
i100
Arts and Entertainment
Bright lights, big city: Melrose Avenue in Los Angeles by dusk
books
Sport
Harry Kane makes Paul Scholes' Premier League team of the season
footballPaul Scholes on the best players, managers and goals of the season - and the biggest disappointments
News
i100
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Day In a Page

Fifa corruption: The 161-page dossier that exposes the organisation's dark heart

The 161-page dossier that exposes Fifa's dark heart

How did a group of corrupt officials turn football’s governing body into what was, in essence, a criminal enterprise? Chris Green and David Connett reveal all
Mediterranean migrant crisis: 'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves,' says Tripoli PM

Exclusive interview with Tripoli PM Khalifa al-Ghweil

'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves'
Raymond Chandler's Los Angeles: How the author foretold the Californian water crisis

Raymond Chandler's Los Angeles

How the author foretold the Californian water crisis
Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts

Art attack

Chinese artist who posted funny image of President Xi Jinping facing five years in prison
Marc Jacobs is putting Cher in the limelight as the face of his latest campaign

Cher is the new face of Marc Jacobs

Alexander Fury explains why designers are turning to august stars to front their lines
Parents of six-year-old who beat leukaemia plan to climb Ben Nevis for cancer charity

'I'm climbing Ben Nevis for my daughter'

Karen Attwood's young daughter Yasmin beat cancer. Now her family is about to take on a new challenge - scaling Ben Nevis to help other children
10 best wedding gift ideas

It's that time of year again... 10 best wedding gift ideas

Forget that fancy toaster, we've gone off-list to find memorable gifts that will last a lifetime
Paul Scholes column: With the Premier League over for another year, here are my end of season awards

Paul Scholes column

With the Premier League over for another year, here are my end of season awards
Heysel disaster 30th anniversary: Liverpool have seen too much tragedy to forget fateful day in Belgium

Liverpool have seen too much tragedy to forget Heysel

Thirty years ago, 39 fans waiting to watch a European Cup final died as a result of a fatal cocktail of circumstances. Ian Herbert looks at how a club dealt with this tragedy
Amir Khan vs Chris Algieri: Khan’s audition for Floyd Mayweather may turn into a no-win situation, says Frank Warren

Khan’s audition for Mayweather may turn into a no-win situation

The Bolton fighter could be damned if he dazzles and damned if he doesn’t against Algieri, the man last seen being decked six times by Pacquiao, says Frank Warren
Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

How Stephen Mangan got his range

Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor