Grow Up You Finance Types.

Of course the AstraZeneca outcome is good for the UK science base. The UK government spends billions on scientific research. Why should the Yanks get the benefit of it?

Track record suggests that Pfizer would sack British staff and asset-strip the IP if they bought AZ.

Now come shareholders’ recriminations. The shares were £44 before the bid and the bid was worth £55. The shareholders wanted that money.

But the shareholders’ arguments for why they should have been entitled to their dosh are couched in one-sided and threatening terms.

Instead of a reasoned analysis balancing the effect of the loss of national control over AZ with the one-off cash benefit to their customers,  Schroders says it “notes with disappointment the quick rejection by the AstraZeneca board of the latest offer from Pfizer and the decision of the Pfizer board to draw a premature end to these negotiations by calling their latest proposal final.”

Schroders, which owns 2% of AZ, says it “encourages the AstraZeneca management to recommence their engagement with Pfizer and subsequently their shareholders”.

The threat is blatant – ‘we can turf you out you management johnnies – do what we want or you are out on your ears’.

Axa, Jupiter Asset Management and other investors take the same tack.

But, if they want to retain any credibility as responsible people, it’s not enough for the financial community just to say ‘we want our £11 premium now.’ These investors have to assess what the downside effect on the long-term future of the British economy would be and balance that with the short-term cash return..

As has been widely noted, the financial community seems to have learnt nothing from the crash of 2008. They showed in 2008 that they put their own profit before everything else – even national ruin – and they’re showing it again now.

If they can present a plausible case why the short-term one-off cash benefit outweighs the long-term economic and intellectual benefits to the UK, then let them have their £11. If they can’t, then the people who run these financial institutions should be shamed into abandoning their threats and their avaricious practices.

The time has gone when short-term returns can be justified whatever the long-term consequences.

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14 Comments

  1. david manners
    May 22, 2014 20:00

    Yep, that’s the way to do it Mike, getting everyone’s interests – shareholders, employees, customers and management – aligned. Making great products, giving stock to all employees, having managers who walk the floor, growing the share price for the owners – it sounds like a golden age.

  2. Mike Bryant
    May 22, 2014 19:16

    Oddly enough it was Dave Packard who pointed out to HPers in the early 80s that shareholders come first as it’s their company.

    Hardly a modern CEO or investor-apologist.

    Of course most people who worked at HP invested about 5 to 10% of income in the company hence it was our company as well.

  3. david manners
    May 22, 2014 09:08

    There seems to be a fashion in this Mark, as you say, the priorities change. At the moment, for industrial companies, it’s lip service to shareholders first but in many cases it’s actually top management first, then customers, then employees. The financial services industry has been able to dictate the ‘shareholders first’ priority because they have the power to affect the share price. But, as you say, these financial services people tend to treat the people who provide their own capital with contempt, prioritising returns to their employees. It’s a way of keeping the wealth creators – the industrial companies – under the control of the financial services industry. Clearly it’s high time for a change in priorities and that can only happen when industrial managers tell the financial services people that they’re prioritising the long-term health of their companies above the priorities of the financial community.

  4. Mark
    May 22, 2014 01:48

    Many years ago, I remember CEOs saying that “their people” came first, then customers and finally investors.
    Then that changed to “customers first”, employees second and investors third.
    Then the big change to “owners” (stockholders) first, customers second and employees third.

    So, how long do these “owners” hold stock? Figures are hard to come by but the Telegraph in 2012 estimated 22 seconds. Hmm, hardly “owners”. With High Frequency Trading it’s probably sub 1s now.

    Goldman Sachs not so long ago stated that profits should go first to their highly skilled employees and that stock holders were simply providers of capital who simply deserved a small return on their capital. Interesting how different rules apply to the financial sector.

  5. david manners
    May 21, 2014 13:55

    Very true, Dr Bob, the johnnies might as well fight on and anyone trusting Pfizer’s assurances has to be a moron.

  6. Dr Bob
    May 21, 2014 13:46

    just a couiple of points.

    1) Most of those management johnnies will be out on their ears if Phizzer takes over anyway

    2) Kraft and Cadbury seems to have been forgotten about with regards to US company morals and promises

  7. david manners
    May 21, 2014 11:04

    Well our government like all sophisticated governments pays for scientists to research stuff, SilverMan,. They don’t usually try to dictate how the results off that research are commercialised. Maybe they should.

  8. david manners
    May 21, 2014 10:59

    Absolutely, Stooriefit, which explains why the acquirers’ shareholders usually deplore M&A while the acquirees’ shareholders like M&A because they’ll get a higher return than they would get from hanging onto the shares

  9. SilverMan
    May 21, 2014 10:40

    I expect the billions the “government” (aka taxpayer) spends on “research” turns out to have only backed the losers and dead-end projects.
    Any path that results in anything useful shall be “spun out” and goosed for maximum profits – charging the NHS the cost of “one arm and one leg please”

  10. Stooriefit
    May 21, 2014 10:35

    The investment houses motives are pure and simple – they want to see churn because their ‘non-return valve’ in the finance system always diverts a chunk of cash into their pockets.

    M&A almost always destroys shareholder value, so the shareholders should get wise to them.

  11. david manners
    May 21, 2014 09:32

    I never said amoral, DontAgree, and I never said profit should be subjected to worthier goals, I just said that Schroders et al should balance profit against the national interest when they argue for AZ’s takeover.

  12. DontAgree
    May 21, 2014 08:04

    So your argument is basically that it is ‘amoral’ to give priority to profit over other more worthy goals …

    Well then, what about the ‘defense’ industry that makes human killing machines in order to make a profit?
    Or what about the tobacco industry? Cigarettes are in essence very slow killing machines, with the added ‘benefit’ of causing a tremendous burden on the health care system.

    Now those are the obvious ones, but let me go on further down this very slippery slope …
    Hardwood industry killing the rain forests.
    Fast food industry causing obesity and many cardiovascular diseases.
    Oil industry responsible for many environmental disasters.
    Nuclear energy industry responsible for disasters, and a huge waste problem.
    Electronics industry causing huge waste problem with all their ‘soon to be obsoleted gadgets’.
    Industry at large responsible for global warming …

    Compared to this list I would consider the AZ situation a minor nuisance at best.

    Perhaps the financial types are not the ones that should do some ‘growing up’ …

  13. david manners
    May 20, 2014 14:58

    The money comes from the profits created by our great industrial companies, AnotherDavid, which pay their dividends into pension funds, pay their taxes to run the country, maintain the intellectual excellence of our research institutions and create future jobs for our kids.

  14. AnotherDavid
    May 20, 2014 14:51

    And where do most of these companies get their money, our pension funds, which we need for long term pensions! As well as jobs for our kids.
    David

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