[Ip-health] FT editorial: The real choice that AstraZeneca faces

Thiru Balasubramaniam thiru at keionline.org
Mon May 12 05:42:30 PDT 2014



One of the most troubling aspects of Pfizer’s bid is its lack of evident
commercial logic. The choice of target and the form of consideration seem
to be driven principally by the US group’s desire to re-domicile itself in
the UK and shrug off certain burdensome American tax liabilities.

The deal will not obviously strengthen AstraZeneca in its pursuit of drug
discoveries, or its ability to bring new life-saving compounds to market.
Nor will it increase competition or sharpen innovation across the sector.

Pfizer’s dealmaking history is moreover a deeply dispiriting one. The group
has a reputation for delivering returns to its investors not through
creative management and groundbreaking research, but by the frequent
execution of accountant-led, cost-crunching acquisitions.

Its financial record is questionable. Despite having spent some $240bn on
three big acquisitions since 2000, its market capitalisation is just $185bn
today. Meanwhile the Dow Jones index is more than 40 per cent higher.

AstraZeneca’s future as a business may not be the primary concern of
shareholders who hope to sell their investment for a profit – especially
those who have held their shares for a short time and are interested
primarily in quick returns. But it should be in the minds of directors as
they consider how to respond to Pfizer’s approach. While the UK group’s
fate lies ultimately in the hands of its shareholders, the board has a
critical role in influencing the outcome of any hostile bid.

The prevailing wisdom in the Anglo-Saxon world over the past 35 years has
been that boards should simply respond to what they perceive their
shareholders’ wishes to be. But this is incorrect.

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