ALEX BRUMMER: British firms that dream of making it big on Wall Street should be careful what they wish for
Wall Street’s appeal to UK companies seeking higher valuations, independence from UK corporate governance standards and more generous executive pay is understandable.
These factors all played a role in SoftBank’s pivotal decision to resell Arm Holdings in New York and Tarmac owner CRH’s decision to relocate to the United States.
Other would-be emigrants, like medtech giant Smith & Nephew and banker HSBC, peeked over the fence and decided to stay put.
Cambridge-based biotech Abcam was among those who decided to make the Nasdaq route.
The company’s antibody discoveries are used by 750,000 researchers around the world. It is an important link in the life sciences chain, which is a great boon to researchers working on oncology treatments.
Dog eats dog: When smaller, innovative British companies make the decision to go west on Wall Street, they have to be careful about what they wish for
Veteran fund manager Richard Buxton warned of the “very sad state” of UK stock markets in an FT interview this week ahead of his retirement after four decades in the City.
He argued that it could be “many years before declining London markets are reversed”. However, he failed to point out that the main reason for the decline is not only the allure of Wall Street, but also the UK’s extraordinary willingness to sell its crown jewels to the highest bidder.
That’s why so many of our mismanaged utilities, from water to electricity to airports, are in foreign hands, betraying the legacy of the Thatcher privatizations.
Of late, the London stock market has also had to face challenges from activists. That reminds me of Elliott Advisors’ undeserved criticism of Emma Walmsley, CEO of GlaxoSmithKline, and Nelson Peltz’s idea at Unilever.
Activism is far more pronounced on Wall Street, and there are even mutual funds that specialize in buying stocks based on early regulatory filings.
When smaller innovative companies make the decision to go west, they need to be careful about what they wish for. It wasn’t long before Abcam fell victim to the activists.
A disappointing stock price performance in the US drew unwanted attention not only from activist Starboard Value but also from company founder Jonathan Milner, who owns 6 percent of the shares.
Instead of the board of nodding directors – led by chairman Peter Allen – tackling the defense of Britain’s science and innovation, there was little opposition to an offer.
With an offer of $24 per share (£19), a valuation of £4.5 billion and rebellious investors, the company found a £150 billion offer from Danaher irresistible.
The streets of New York now seem to be paved with gold. But during its short stint on Wall Street, Abcam’s genius went largely unnoticed as the stock plummeted.
As is often the case with a proposed new owner abroad, Danaher tries to ward off criticism from the start. A less clear press release states, “Abcam is expected to operate as a separate operating company and brand within Danaher’s Life Sciences segment.”
Perhaps. But Abcam is a key player in the UK’s world-leading life sciences sector and it is a terrible waste to see the company, its scientists, engineers, patents and innovations fall into the hands of a foreign medical group.
Losing a stock market price for a UK-headquartered company to the US is always a major blow. But with foreign ownership comes command and control.
The sale acts like a powerful vacuum cleaner, sucking out the best and brightest overseas, diminishing the importance of a UK head office and allowing corporation tax to trickle away.
The Tories’ attempt to return Arm to the UK failed. Now they have a new opportunity to show they are serious about delivering on Jeremy Hunt’s promise to make the UK the next Silicon Valley.
There will be claims that Abcam needs the investment capital that its prospective owners wish to provide.
These are exactly the sort of companies that could have benefited from the London Stock Exchange’s new ‘middle’ fundraising platform if they hadn’t left the City in the first place.
Business Secretary Kemi Badenoch has an opportunity to show the government is ready to scrutinize foreign deals and ensure they work in the broader public interest by invoking the National Security & Investment Act.
No other G7 country would allow valuable science and biotechnology to leak abroad so easily.