AstraZeneca shares fell 9 per cent after reports emerged that the pharmaceutical giant was weighing a takeover of US rival Bristol Myers Squibb. The stock only partly recovered after Reuters reported there were no ongoing talks between the two companies.
Columnist Hamish McRae writes that the market's reaction shows the deal would not have been good for AstraZeneca. The company is good at developing new drugs, especially for cancer, and briefly became the most valuable London-listed firm this year, a success McRae attributes to organic growth rather than takeovers.
AstraZeneca's chief executive is Sir Pascal Soriot, who is French. The company itself was formed in 1999 through the merger of Astra, founded by Swedish doctors in 1913, and Zeneca, the pharmaceutical arm of Imperial Chemical Industries that was spun off in 1993. McRae notes that the rest of the old ICI chemical business later collapsed, and what remained was bought by the Dutch group AkzoNobel in 2008.
Other cross-border mergers
McRae points to GSK, formerly GlaxoSmithKline, as a mixed example. It was formed by the merger of Glaxo Wellcome and SmithKline Beecham in 2000, when the combined group was valued at more than £100 billion. Its market capitalisation now stands at £80 billion, which McRae says makes it a successful enterprise but not the global powerhouse it might have become.
UK firms that struggled in America
HSBC, now the most valuable member of the FTSE 100 index, tried to build an American banking arm by taking over Marine Midland Bank in the 1980s, at one point becoming the 13th largest bank in the US. HSBC still runs corporate banking there, but McRae says its retail business was progressively wound down, and the US operation now mainly serves wealth management for high-net-worth clients.
Tesco, then the second or third largest retailer in the world, tried and failed to break into the US 20 years ago with upmarket convenience stores called Fresh & Easy, losing close to $2 billion, then about £1.2 billion, on the venture. Sainsbury's and Marks & Spencer also tried and failed, though McRae notes M&S now sells some clothes in the US through partnership deals.
Bright spots and national security
McRae highlights some UK successes in America. BAE Systems is now the sixth or seventh largest US defence contractor and the fourth or fifth largest defence contractor in the world. He also notes that the company behind InterContinental Hotels and Holiday Inn, often seen as an American brand, has its headquarters a few hundred yards from Windsor Castle.
McRae argues the pandemic showed the importance of producing drugs in the UK, after Europe tried to shut Britain out of Covid vaccine supplies, and says the same logic now applies to keeping investment in North Sea oil and gas and to food security. He concludes it is common sense to encourage AstraZeneca to do as much of its work in the UK as is practical.
