Exclusive: Pfizer Insider Warns That Takeover Of Astrazeneca Could Be ‘Devastating’

[Bear Goggles]

Agreed, but, and here is the question, is this not equally true of property? Do property prices not depend almost entirely on government intervention (restricting of land for development, supply of cheap credit, equity stakes, unchecked supply of new buyers via open door immigration policies)? Do we hear anyone objecting to the invasion of prime london property by the world's money launderers? Is this point ever raised in select committees? And if not AND we allow government to crimp the price and desireability of other investments, what MUST this mean for property prices?

Well, quite.

The thing is, there is loads of objection by the general populous (as demonstrated by this forum) of both too much intervention in the property market - planning restrictions, HtB, immigration etc. - and not enough - BTL mortgages being too favourable, rogue letting agencies, spiv landlords able to chuck tenants out without recourse etc.

The disconnect seems to be in government, or I might even suggest is embedded within neo-liberal ideology itself. Property - is the chosen investment class - to be protected from market forces at all costs.

Now I'm not sure if the moral of all this is that government should not ever interfere with markets, or that market interference by government is inevitable. But I do think it is reasonable to question non-interference as an workable solution, even to the problems of a market that's become dysfunctional due to interference.

If you see what I mean?

[Sledgehead]

Now if rules such as these make individuals such as yourself less wealthy in the long run, because you can no longer extract wealth to societies long term detriment - then good. I have no sympathy with you or any others who espouse view points as you are doing above.

Sorry, didn't read that bit. Now I realise I'm talking to a communist. Good luck with that one.

[alexw]

Apparently saturated fat isn't that bad for us after all. I raise this point because, although the body is a complex system, the opposite was previously believed to be the case and with some certainty. I also remember, prior to that, dietary cholesterol was considered bad. The thing is, economics is just as complex as human metabolism, and yet here you are declaring with 100 % certainty that this takeover can only have negative outcomes, and adding for good measure that my words are nonsense. It's now my turn to be "sorry" and inform you that you could be the living embodiment of Newton, Clark Maxwell, Bohr and Einstein and yet you could still not say with any certainty that this takeover will prove to be "bad". It's banning on the other hand will turn me off equity investing. That is a certainty.

I never said takeovers could only have negative consequences. I said asset stripping of profitable and viable national champion companies, which pfizer has a long track record of, could only have negative consequences. Also that there should be a strong national self-interest rule to oversee takeover activity. If a company is failing then by all means let it be taken over, that would then be in our self-interest. But not surprisingly the vast majority of takeovers are not of this nature. Mostly it's the most profitable and those with good prospects that get taken over. The list of major companies taken over in this manner is endless. Pilkington glass, ICI, scottish & newcastle, british energy, P&O, cadbury's, etc, etc.

P.S. If banning this puts you off, then its not turning you off equity investing, its turning you off less-than-zero-sum-game speculation. Now if we get rules in place to stop you and others like you from speculating in shares on the basis that the company will be in future be sold, then we just have to get more rules in place to do the same to housing. So as I said a land value tax.

P.S. We should also massively free up the ability to build housing.

http://www.opendemocracy.net/ourkingdom/john-mills/foreign-ownership-of-british-assets-has-damaged-our-economy

Unlike any other developed nation the UK has sold off considerable amounts of its major industries and assets to overseas owners. This has weakened democratic control of industry, inflated our exchange rate and seriously undermined our manufacturing base. Here's why.

City of London (Image: Ben Rimmer)

Between 2007 and 2009, the value of the pound fell from close to $2.00 to $1.60, a fall of 20%. Most people think that sterling must therefore be at a competitive level. This is a huge mistake. On the contrary, all the evidence shows that the pound, by any reasonable measure, is still grossly over-valued. We have a massive trade deficit. Our share of world trade is now barely 2.5% and still falling - compared to 25% in 1950. We are now importing well over £100bn more manufactured goods each year than we export. How can this be after a 20% devaluation?

There is a simple answer. For most of the 2000s sterling was not just very over-valued. It was grotesquely too strong. This is why between 2000 and 2010 the proportion of our GDP devoted to manufacturing fell from 17% to 11% while our manufacturing labour force tumbled by a third from 4.2m to 2.8m. Financial services would be our long term saviour, yet this hasn’t turned out quite as hoped. Meanwhile, our trade deficit in goods went from £33bn to £98bn – we import far more than we export. But how could sterling have been so strong if our trading performance was so poor? All else being equal such a large trade deficit would naturally devalue the pound over time, bringing exports and imports back into balance. The reason this hasn’t happened is that there was a huge flow of funds into the UK over this period which had nothing to do with the UK’s trading performance – that inflow drives the value of the pound upwards. The money came in because between 2000 and 2010 we sold off a massive proportion of our national assets. We then frittered away the proceeds on a flood of imports.

Between 2000 and 2010, our total trade deficit was £286bn, but during the same decade the value of our net sales of portfolio assets was much larger than this – at £615bn. None of this money was spent on direct investment in plant, machinery and industrial buildings, which would have strengthened our economy. Portfolio assets are no more than titles to ownership – mostly shares - so selling these to foreign owners involved no physical investment in the UK, just loss of ownership and control on a grand scale.

What did we sell? Foreign interests bought from us an incredible range of what had previously been owned in Britain. Most of our power generating companies, our airports and ports, our water companies, many of our rail franchises and our chemical, engineering and electronic companies, our merchant banks, an iconic chocolate company - Cadbury, our heavily subsidised wind farms, a vast amount of expensive housing and many, many other assets all disappeared into foreign ownership.

No other country in the world allowed this sort of thing to happen. Why did it occur in Britain? There were three main overlapping reasons. The first was an institutional change. Until 1999, when it was abolished, the Monopolies and Mergers Commission was required to consider whether take-overs satisfied a general public interest test. The organisation which replaced it after 1999, the Competition Commission, had no such remit. It was only concerned with whether acquisitions would weaken competition. This left the UK with no process for reviewing whether the wider interests of the British economy were likely to be compromised by the purchase by foreign interests of UK companies and other assets.

Second, this was the time when there was blind faith in the market. If there were buyers for British companies why not sell to them? Did it matter who owned UK companies provided they were well run? Third, there were vast sums of money to be made arranging the take-over deals. It seems that 3% was about the average fees and commissions charged on all the take-overs which took place. The City – for most of the 2000s at the zenith of its political influence - must have earned about £40bn from the sale of UK assets during the 2000s.

Does it matter that we lost ownership and control of such a large proportion of our national assets? Yes, it makes a huge difference for all of the following reasons:

Management

When any company is bought by another one based abroad, it is inevitable that control will pass to those whose focus is primarily based not on the UK but on their home markets. This is where research and development will tend to be concentrated. This is where the loyalties of top management will lie. This is where taxes are more likely to be paid and where the links between the businesses concerned and the government are likely to be strongest.

Investment

When acquisitions are made by foreign companies, it is not unusual for undertakings to be given that investment levels will be maintained and factory closures minimised or avoided. These assurances, however, are always time limited, and when trading conditions worsen and hard choices have to be made, international companies nearly always give preference to their home markets. There is a huge problem, for example, in the UK at the moment where most of our power companies are foreign owned. They all have serious problems raising the capital required for investment and pressing needs for large scale investment in their home markets. Are they really going to be able and willing to provide the expenditure we very badly need in the UK to avoid power outages in a few years’ time?

Profits

When a British company is sold to a foreign owner the flow of future profits goes with the ownership. Of course there is a temporary infusion of funds to the UK as the assets are sold but this is at the expense of losing the right both to future profitability and to any growth in value of assets lost to UK ownership. There is a very unfortunate parallel here between the way we treated North Sea oil from the 1970s onwards and the huge sale of UK portfolio assets in the 2000s. In both cases the proceeds were used to pay for imports we could not otherwise have afforded while the opportunities for alternative future benefits, had the proceeds been used more sensibly, were lost.

The Exchange Rate

When allowed to take place on a big enough scale, the impact of very large volumes of sales of portfolio assets to foreign companies inevitably tends to be to make the exchange rate much stronger. This is exactly what happened in the UK, with all the negative effects that this had on our exports, which got priced out of the market. This is why the sale of so many UK companies in the 2000s was a major factor in undermining the rest of the economy’s capacity to compete in the world – the public interest of such sales goes far beyond merely domestic “competition”. The net sale of British portfolio assets during the 2000s financed the sharply increasing trade deficits which were caused by the damage done to our ability to compete in the world, which in turn was occasioned by the over-valued exchange rate which itself was largely brought about by excessive asset sales.

Did it make any sense at all to run the economy like this? Surely it was a disastrous error to allow this free for all sale of UK assets to take place. We mortgaged our heritage, made the economy dramatically less competitive, hollowed out our manufacturing base and made it even more difficult to get the economy to perform satisfactorily in future. Some price to pay for belief that the market always knows best!

Edited May 7, 2014 by alexw

[alexw]

Sorry, didn't read that bit. Now I realise I'm talking to a communist. Good luck with that one.

And there like magic, appears the neo-liberal reply to anyone who suggests that we should base our nation on anything more than an individuals selfish self-interest...

I must of course be a communist!

[okaycuckoo]

And there like magic, appears the neo-liberal reply to anyone who suggests that we should base our nation on anything more than an individuals selfish self-interest...

I must of course be a communist!

Self-interest is confirmed in one's value to the community. I think that's a basic lesson accepted by Adam Smith.

As always, balance requires two sides - something rejected by aggressive fantasists.

[Sledgehead]

Here's Alistair Heath's view :

Let Pfizer buy Astra, there is no room for nationalism in business

"The political controversy surrounding the possible takeover is therefore misplaced. There should be no additional public interest tests, no lengthy inquiries and no more restraints on the free market. MPs are entitled to grill whoever they want, of course, but they should remember that companies are owned by their shareholders, who must retain the right to sell their property as they see fit, including to foreigners. There should only be a very small number of exceptions relating to genuine questions of national security."

Allistair Heath, 07/05/2014, The Telegraph

Sums it all up nicely, as he did with Help to Buy :

http://www.youtube.com/watch?v=dpA7Fg53x04

Alexw can bang on all he likes, but watch his reaction when I tell him he can't sell his car etc to whomsoever he wishes. Shareholders invested in AZN. they have the right to do with their shareholdings as they see fit, because without them, the company would simply not exist. Alexw needs to acknowledge this and try taking on a few equity investments himself. In this life it ain't all about imediate self-gratification mate. I don't know what you are spending your money on, but it doesn't sound like you've ever invested in a business, so you've never chosen to fund somebody elses wages instead of investing in your own sun tan, fag habit etc. Yep, that's right you don't have the moral high ground. Why don't you just go takeover somebody elses country and subject them to famine, instead of pretending to be Britains answer to Jesus?

[Bear Goggles]

Here's Alistair Heath's view :

Let Pfizer buy Astra, there is no room for nationalism in business

Sums it all up nicely, as he did with Help to Buy :

http://www.youtube.com/watch?v=dpA7Fg53x04

Alexw can bang on all he likes, but watch his reaction when I tell him he can't sell his car etc to whomsoever he wishes. Shareholders invested in AZN. they have the right to do with their shareholdings as they see fit, because without them, the company would simply not exist. Alexw needs to acknowledge this and try taking on a few equity investments himself. In this life it ain't all about imediate self-gratification mate. I don't know what you are spending your money on, but it doesn't sound like you've ever invested in a business, so you've never chosen to fund somebody elses wages instead of investing in your own sun tan, fag habit etc. Yep, that's right you don't have the moral high ground. Why don't you just go takeover somebody elses country and subject them to famine, instead of pretending to be Britains answer to Jesus?

Again, I agree with you in principle but not in practice.

Without government these organisations wouldn't exist either due to massive state funding for basic research, and through state-funded universities and medical infrastructure, so it really isn't as simple as it may look from behind the terminal of a city trading desk.

It's not a coincidence that these companies choose to base themselves in countries that have good state-funded research institutes, (UK, US, Germany, Japan etc.) nor that within those countries they choose to base themselves near centres of educational excellence - Oxfordshire, Cambridgeshire, Massachusetts, Berkeley etc.

The state is integral to this industry. It spends billions of tax-payers money creating the conditions that allow companies like this to thrive and make money for their shareholders. So it IS a matter for national debate.

This doesn't mean that I think the government should block the sale, but I think it legitimate for them to scrutinise a takeover like this, and that it's not a simple as free-market fundamentalists would have you believe.

[THE BALD MAN]

Drugs companies income in Europe comes from the state re-reimbursement of pharmaceutical prescriptions. Therefore we as tax payers have a right to have a say in the structure of pharma companies. To allow the takeover would yet again asset strip the UK.