Margareta Pagano: Did Murdoch give the game away over BSkyB?
The media mogul's evidence to the Leveson inquiry on his move for the TV company showed reform is vital if future takeovers are to get a fair hearing
Margareta Pagano is a former business editor of the Independent on Sunday who now writes columns and business interviews for a range of publications, including the Independent, Independent on Sunday and London Evening Standard.
Sunday 29 April 2012
Of all the fascinating insights Rupert Murdoch revealed during the Leveson inquiry last week, by far the most gripping was his claim that News Corporation would have succeeded with its bid for BSkyB if it hadn't been for the phone-hacking scandal. It was classic Murdoch; bold, cheeky and to the point. And he is probably right.
It was also the moment when Murdoch let us see, just for a second or two, himself at his most raw and transparent. The steely businessman who knew he had blown the deal of a lifetime for a couple of third-rate stories. What he was saying, in effect, was that allowing such a tawdry affair as hacking to get out of hand had cost him the far bigger prize of BSkyB and its billion-pound cash flow. No wonder he is so apologetic, and is cursing himself.
But how, you might ask, could Murdoch have been so sure he would have won BSkyB? Was it because Murdoch, once Vince Cable was sidelined after The Telegraph sting, thought he had David Cameron and Jeremy Hunt in his pocket after months of courting them at parties and Chipping Norton dinners? Don't bank on it.
Murdoch is far too smart to rely on favours from the politicians. There are more pedestrian reasons why he could be so certain.This is because the takeover process on matters such as media ownerships is out of date, and the role of the Secretary of State – in this instance Jeremy Hunt but normally the Business Secretary – is a quasi-judicial one, and is flawed.
If the Murdoch fiasco provides any lessons, it is that we should look again at the position of the Secretary of State who refers any bid deemed in the national interest to the Competition Commission (CC) for further scrutiny.
In Murdoch's case, Hunt ignored the advice of Ofcom to refer. He was foolish not to, but not wrong, because on the evidence available he was able to take the third option – to seek undertakings from News Corp "in lieu", which in this case was ring-fencing Sky News. But even though, technically, Murdoch was given the green-light to bid, he didn't dare go ahead; once the Milly Dowler phone-tapping came to light, he knew it was game over.
Takeover rules give three grounds for ministers to stop a bid on public interest grounds: national security, a threat to the banking system, or if it impacts on "media plurality" – a loosely defined concept by which politicians would have to be persuaded that rival newspapers and broadcasters were at risk of closure or cuts that would damage democratic debate.
Murdoch didn't need political favours because News Corp laywers would have been advised there were no "plurality" grounds on which to refer the bid. Owning a few loss-making newspapers and a big broadcaster doesn't constitute plurality. Indeed, most competition experts at the time claimed there was no case to argue either under UK or EU law and that a referral to the Competition Commission would have smacked of political interference, a way of kicking the issue into the long grass.
Of course rival newspapers were among the most vociferous lobbyists against Murdoch owning BSky. But it wasn't plurality they should have been focusing on because it's an outdated concept. The rules need refreshing to take account of the new world; the blogging, tweeting and other new social media that make it complex to judge what "plurality" means.
This suggests two reforms: future big media bids should be treated on normal, economic, grounds. And the quasi-judicial status of the Secretary of State should be changed; the Office of Fair Trading/CC should be the agency which decides if a bid is referred, without political interference.
It makes so much sense, and would take much of the political hysteria out of takeovers. Future Secretaries of State wouldn't need to hide behind trees because they don't want to be seen at proprietors' parties by the press.
The drugs don't work for AstraZeneca any longer
Blame the white powder; it's their addiction to pill-popping that has cost AstraZeneca chairman Louis Schweitzer and chief executive David Brennan their jobs in one of the biggest boardroom shake-ups the City has seen for years.
Schweitzer was due to retire anyway, but it does look as though Brennan gave himself up because he knew that AstraZeneca's bad habits were leading the UK's second biggest drugmaker to eventual extinction.
For the days of the blockbuster, white-powder drugs are numbered; partly because they are coming off the patent-cliff. Its big drugs, like the antipsychotic Seroquel came off patent last month, while heartburn pill Nexium and heart drug Crestor both lose their US protection in 2014 and 2016 respectively.
Brennan has tried to find alternatives to revive AZ by cutting costs and staff and by buying smaller, innovative drug-companies to produce new winners. He's also returned billions to shareholders through buy-backs and dividends.
But it's not a strategy for renewal, certainly not when the shares are trading at a lowly multiple of seven times this year's forecast earnings. By going, Brennan gives a new generation the chance to change the company's culture and to re-think where it should be heading. Simon Lowth, the finance director, fills his place until the chairman-designate, former Volvo boss Leif Johansson, finds a successor.
It's a daunting task; healthcare is going through a revolution every bit as dramatic as the one that produced blockbusters. Today, drugs are being designed to meet personalised genetics; so drug researchers need to work direct with the clinicians, creating more translational medicine. Integrated care is the new culture and AZ has to adapt.
Brennan should be praised for knowing when to go. His successor will have a tough job as the most obvious evolutionary step in healthcare will be when the drugs and technology companies merge. It's Microsoft, even Google, not its drug rivals that AZ has to watch out for.
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