ALEX BRUMMER: Morrisons and Ultra must learn from Astrazeneca

ALEX BRUMMER: Investors have been rewarded for backing a besieged company in Astrazeneca – Morrisons and Ultra Electronics, take note

Shareholders and Morrisons’ slack management need only look at Astrazeneca’s fate since 2014 to understand why rejecting financially driven foreign suitors is the way to go.

Astrazeneca (AZ) has risen the FTSE 100 to become Britain’s most valuable company, with a market capitalization of £128 billion.

But it also single-handedly demonstrates that big pharma can also have a public conscience.

Reward: Astrazeneca, led by Pascal Soriot, has climbed the FTSE 100 to become Britain’s most valuable company, with a market cap of £128 billion

On the same day that a smaller private equity pharmaceutical group, Advanza, was publicly humiliated and fined by the Competition & Markets Authority for inflating prices, AZ revealed vaccine sales in Oxford tripled to £643 million in the second quarter. This is a fraction of the revenue that US competitor Pfizer discloses for Covid prevention. AZ has so far managed to distribute nearly 1 billion doses of its life-saving Covid vaccine at cost.

The Americans have played hard with approvals and the European Union has got itself into trouble over safety and production delays. Yet AZ did the right thing. Not only has it protected the UK, but it has also shipped vaccines to middle- and low-income countries. Chief executive Pascal Soriot plans to roll out at least 1 billion additional doses at a bargain price. If AZ’s board of directors had rolled over six years ago, as Morrisons and countless other companies have done to private equity barons and foreign buyers, the company would barely exist today as an independent entity.

AZ is much more than vaccines. It is a leader in the new science of using immunology to treat deadly diseases such as cancer. Tagrisso’s lung cancer treatment has become a $5bn (£3.9bn) blockbuster and AZ is teaming up with other research organizations to come up with a blood test that will help it detect lung cancer in its earliest stages so it can be cured effectively . In the first half of the year, AZ sales, helped by the vaccine, rose 18 percent to £11.1 billion. Although profit margins were under pressure, investors are still buying the AZ story and its promising pipeline, bolstered by the integration of US rare disease specialist Alexion. Among the potential blockbusters in the pipeline are new therapies for leukemia and kidney disease.

Investors have been rewarded for backing a beleaguered company. Morrisons and Ultra Electronics, take note.

Stanley falls

So many big city names, from Robert Fleming to Warburg and Cazenove, have sunk beneath the waves that it’s hard to enter a period of mourning over the sale of asset manager Charles Stanley to Miami-based upstart Raymond James.

Stanley has a heritage dating back to 1792, and at a time when clients value good stock execution, sound asset and retirement management and custody, it’s hard to imagine it didn’t have an independent future.

When American looters arrive armed with big checkbooks with a big bounty, it gives the executives the opportunity to go out with big payouts.

Under the terms of the deal, chairman Sir David Howard will receive £66 million for his significant family stake and he and CEO Paul Abberley will nominally remain at the helm.

Raymond James’ British chief, Peter Moores, will oversee the operations. As we’ve seen in previous deals – including the merger of Standard Life and Aberdeen – such double banking of roles rarely lasts.

There have been a string of deals in the lower echelons of wealth management, so the latest £279m deal is part of a trend. It’s hard not to argue that in Britain’s leading financial sector, overseas ownership has been anything but beneficial, creating jobs and fueling HM Treasury’s coffers. Losing a historic City player is nonetheless daunting.

Tequila sunrise

Diageo is sitting on a war chest after a stellar Covid year that saw US sales power up 20.2 percent, thanks to Johnnie Walker and thriving tequila brands Casamigos and Don Julio.

Free cash flow rose to £3.7bn from £1.2bn in the 12 months to June 30, allowing CEO Ivan Menezes to invest more and deposit £72m to help the bar trade through the pandemic and increase its dividend .

The big challenge now is to find a suitable bidding target in a spirits market where family ownership still dominates.