Lord Myners has got it wrong on AstraZeneca

A political storm is brewing over AstraZeneca

“It’s a decision that’s too important to be left to shareholders”.

These are the words of former City minister Lord Myners talking about the American drug giant Pfizer’s bid for AstraZeneca. We’re all entitled to an opinion, of course, but I think he’s dead wrong.

Myners spent his business career as chairman of institutional fund manager Gartmore. He had a duty to represent the interests of company owners – the shareholders, who were his clients.

So why is he now arguing that shareholders should give up their rights, not exercise them?

Well, things can get emotional when big, foreign takeovers appear on the horizon. We have to ask questions about how the ‘national interest’ is best served, and what role investors should play. Everyone wants to step in and voice their opinion.

Me, I strongly believe that we should let the market pick its own winners and losers. And I think Lord Myners has got it wrong – the people best-placed to decide on Pfizer’s bid are AstraZeneca’s shareholders themselves. Not politicians in Westminster. Let me tell you why.

What do civil servants know about the markets?

I’ll lay my cards on the table straight away. I’m a firm believer in the capitalist system.

What that means is that I think scarce economic resources are best allocated by the ‘invisible hand’ of the market. Lots of people seeking to make money is the how we ensure we don’t waste our financial, physical and intellectual capital. It’s how we produce the things that people really want and will pay for.

The alternative is to let a civil servant, or even worse, a politician, decide for us. And there are plenty of examples which show the folly of letting the state take on this role. The most extreme is Soviet Russia. A more recent example could be post-Soviet Russia!

Closer to home, British Leyland should be a warning to any government promoting ‘national champions’. Political interference in the sale of what was left of Rover Cars also ended in disaster.

Have you got the picture yet? Time and again, governments have made lousy investment decisions when they act in what they think is the national interest.


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AstraZeneca doesn’t have to be independent to benefit Britain

The media finds it very easy to play on nationalistic sentiment – the idea that we should keep great British institutions safe in domestic hands. Ironically, AstraZeneca has actually been cutting British research and development jobs for years! In fact, it’s in the middle of a cost-cutting programme which aims to lose about a tenth of its workforce.

And like all major pharmaceutical companies, it’s really a global business. It can’t be tied down to one country. After all, even its current incarnation is the result of a cross-border merger with Sweden’s Astra.

At the end of the day, we have a vibrant life sciences industry here in Britain, built on the success of our world-class universities. AstraZeneca is only a part of it. In the world’s top four universities for Clinical and Health, we have three: Oxford, Cambridge and Imperial London (the fourth is Harvard).

This is the bedrock of our scientific expertise – not whether AstraZeneca remains independent.

Shareholders must stand up and be counted

So this is when investors need to take a stand. We need to take a hard look at AstraZeneca’s long-term prospects, and compare them with the value offered by Pfizer. This decision has to be driven by commercial considerations and by the terms offered to shareholders.

And that’s why the best placed people to make this decision are AstraZeneca’s owners themselves.

If not, we end up protecting management from the ultimate sanction – the threat of takeover. Takeovers are capitalism’s way of getting rid of bad company management. If shareholders do their jobs and seek involvement, then this mechanism won’t be needed.

But like a nuclear weapon, it’s useful to have as a last resort. Take this power away from shareholders and we’re on the road to the mediocrity of dirigisme, and politicians picking winners.

That’s why we must let the market pick its winners and losers. Our true national interest lies in making sure our companies are managed well and are as productive and efficient as possible, not in protecting one company or another from the market.

That means shareholders have to exercise their ownership rights and take company boards to task. These decisions are too important to be left to Westminster or Whitehall.

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5 Responses

  1. 08/05/2014, DrD wrote

    “I strongly believe that we should let the market pick its own winners and losers”

    Yes, like we did with the banks… Doh!

  2. 08/05/2014, Healthy1 wrote

    Any moves by Pfizer to takeover AstraZeneca must be viewed as a bid by a wolf in sheep’s clothing. American drug companies are very suspect by the American population due to the FDA ignoring warnings ref. drug side effects, approving drugs and vilifying any dissent to the extent of stripping anyone of credibility who tries to have side effects noted in drug particulars. Our companies are supported and verified by a very different system and is trusted worldwide. The FDA is not! Therefore the shareholders need to do due diligence in ensuring that they are satisfied that any takeover is going to retain our system of approval in this country for any advances in drug production. I can see Pfizer producing drugs here and then seeking approval in their own country for worldwide distribution leaving us to take the blame for any failure in the future. More strength to Vince Cable to ensure that the Pfizers of this world can not run rough shod over our own indigenous Companies. Some protection must be given from foreign takeovers. Our utilities are owned by foreigners. Our nuclear plants are built by foreigners, when we have a system based on Thorium awaiting funding to be exploited world wide. But we seem to be blind to the gradual takeover by outsiders who then squirrel away the profits to themselves.

  3. 09/05/2014, MARLIN wrote

    Great article, I agree totaly. We live in a capitalist democracy. The banks were saved by the government, why? If you wish for politicians to interfere with how our large businesses are run, well be careful what you wish for. Then again you may always live in Cuba.

  4. 09/05/2014, msportfan wrote

    Oh dear, oh dear, oh dear! I think that the only thing that you have got right here is that British Leyland was a disaster! It is a complete nonsense to say that takeovers are capitalism’s way of dealing with a bad management team. Most takeovers are about increasing market share, gaining a competitor’s technology, or gaining access to a new market. It has nothing to do with management expertise.

  5. 10/05/2014, Frederick Charles wrote

    Small Share holder

    I cannot think of any other country where, with Pfizer’s record, this would be allowed to go through. With the disasterous takeover of Rowntrees, and more recently Cadbury’s what are Pfizer’s promises worth? I would like to see a few things abroad which are British. Other than JCB, which of course is private, it is diffucult discover anything made here any more.

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