James Moore: Are we rolling over for foreign predators?
Outlook How appropriate that the Business Secretary, Vince Cable, appears before the House of Lords Economic Affairs Committee to answer questions on foreign takeovers when there’s one in the offing.
It’s just that Shire Pharmaceuticals’ battle to stay out of the clutches of the US predator AbbVie hasn’t created quite the furore that Pfizer’s failed pop at AstraZeneca did, not least because neither of the parties carries much name recognition.
As with Pfizer, this isn’t just about drugs, although AbbVie could surely do with the diversity that a takeover of Shire would provide given its reliance on a single product. It’s about tax, and Shire says its stalker would quickly move its domicile to Britain if it succeeded with a bid, using a process known as “inversion” to keep its cash out of Uncle Sam’s hands.
Actually, it’s a bit hard for Shire to raise the Union flag in its defence because it just happens to be domiciled in Ireland, again for tax reasons. And, as Mr Cable pointed out, it’s difficult for the Brits to whinge about inversion given what successive governments have done to corporation tax rates with a view to attracting companies here.
But the question of whether it’s too easy to take over UK companies remains.
Britain would be foolish to adopt the tactics of the French, whose new powers to say “non” to just about any deal are probably illegal under European law, so we’ll see whether they’re tested. Regardless of that, however, they’re probably counter-productive; France might just as well say “non” to any foreign investor. Nor would it necessarily be a good thing to give ministers that sort of power here.
But Britain’s laissez-faire approach could be almost as damaging to the national interest. Professor John Kay, the economist who conducted a review of equity markets and long-term investment for the Government in 2012, argued that there is more ministers could do to make life hot for bad bidders.
He’s probably right, although such leverage needs to be used more effectively than in the case of AstraZeneca and Pfizer, when the so-called “binding undertakings” that Mr Cable and David Cameron keep banging on about were all but worthless.
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