Zak Mir on the AstraZeneca Affair

The AstraZeneca Affair reminds us of a couple of things – how wonderful the capital markets can be and how in the 21st century we really do not need 18th century style government. Indeed, my comments may be an insult to the likes of Sir Robert Walpole. What governments these days seem to be good at is taxing and then er… wasting taxpayers money.

But flush with the “success” of the banking bailouts and averting the financial crisis / saving the world in 2007/8, intervention of every kind is coming through. It is also becoming increasingly draconian and spurious. This is not so important when you are talking about wasting money on vanity infrastructure projects such as HS2 or Boris Island, but when it comes to big business you need Government interference like the Cabinet needs another expenses fiddler.

In fact, the Astra Car Crash seems to have been one of the worst examples of interventionism we have seen for decades, perhaps as bad as the nationalisations of the early post war era. In those days we were literally throwing good money after bad with such classics as British Leyland. Now we seem to be wanting to throw away other people’s good money in Gift Horse fashion.

The consequence is that when our American friends turned up with £69bn and we seemingly have no takers for Pfizer’s cash, you rather get the feeling that something has gone horribly awry. For instance, can anyone argue that £55 a share was not enough when the company’s stock spent most of the last decade languishing at £30 and below?

At the same time the newsflow of the group was always peppered with a disappointment over a drug trial, slap from the FDA or generic competitor coming out of the woodwork. Being an Astra shareholder simply was not a joyous experience, especially given the way that the management seemed to be fully skilled in giving the impression of manoeuvring a sleeping giant in no particularly positive direction.

Unfortunately, the only comfortable explanation as to the lack of enthusiasm from the management of Astra was that if Pfizer was able to shake up the British drugs group and make it a leading player in the sector, this would have served to underline the relative lack of performance in recent years. From a fundamental perspective it has to be noted there is a sense of irony that Astra has rejected the advance of a U.S. group which makes Viagra. Whatever the corporate equivalent of the wonder drug, this is surely what the British group needs!

Of course, you may ask how all of this ties in with the world of spreadbetting / trading? The rather simple answer is that with the shares at just under £44 – and some £11 off the “final” offer level – we seem to be in something of a good situation for the bulls. Given that Astra’s fundamental worth has been highlighted by Pfizer we could be in for a positive re-rating