Preaching on environmental, social and governance (ESG) agendas is a stepping stone for large investors.
Similarly, companies and their boards respond with more detailed ESG reports and endless bromides on purpose.
But when there is money at the table, ESG principles rarely bother a loose board or battalion’s major shareholders who are willing to accept cash and Scrum.
Moral Cowardice: If there was a board of directors that should have been held firmly solely for social and governance reasons, it was the board of directors of Vectura, which was sold out to tobacco giant Philip Morris.
Not only ethics and governance are thrown at one side, but fiduciary duty is compromised.
Frequent acceptance of the first offer on the table can result in the loss of the best deal for investors simply by seeing rival bidders drawn in at significantly higher prices.
In the heat of recent acquisitions, one of the few boards to vie for price and ownership was the board of security group G4S, then headed by John Connolly.
The results may have been the same in the form of private equity-dominated buyouts, but proper defense of hostile offers ending in auctions has resulted in better prices and a powerful broadcast of all discussions.
If there was a board of directors to establish a strong position solely for social and governance reasons, it was Vectura’s who sold the pass to one of the world’s most socially undesirable companies, Philip Morris.
Tobacco is a death machine – see the cigarette box warning. Virtue Signaling by acquiring healthcare pioneer Vectura does not intend to change the dial.
There is no guarantee that Vectura’s R & D and science will not be used for the wrong purpose.
The Marlboro Cigarette Group has effectively modified its results by adopting outdated stock market practices and acquiring a 29% stake in the open market.
Still, the board with the experienced French chairman Bruno Angelich may have told buyers to hike, following the example of French citizen Pascal Soriot in AstraZeneca. Hmm.
Instead, Vectura found himself in an unpleasant position to hold an informal auction between the big tobacco and private equity giant Carlyle. The fact that Marlboro Man was able to collect only 45.61 percent of the minority owners speaks for itself.
The anger of medical groups such as the British Thoracic Disease Society, which represents asthma patients (including my own family), should have been taken more seriously by the board and shareholders taking poison silling.
Not surprisingly, Vectura is no longer allowed near such groups. As we report, Axa is one of the investors who is honest with ESG principles by opposition to trading.
A moral proceeding against Philip Morris invalidates all other factors. It shows that the chairman and board of directors of the company fall into the predator very quickly without proper summation.
The phenomenon is not limited to the United Kingdom. The board of directors of pet food supplier Zooplus, quoted by Germany, bit the acquisition company Hellman & Friedman, but eventually got an 18% higher bid from the same party who initially failed to get a good deal for shareholders. I agreed.
Both UDG Healthcare and St Modwen Properties have accepted their first offers from financial buyers Clayton, Dubilier & Rice and Blackstone, respectively. In effect, they were made to look stupid when forced to go up in price.
In both cases, dissident shareholders made enough noise to raise the offer price. By allowing him to be tempted by the lowball offer, the director chose a simple life.
It was before everyone was involved in the ESG aspects of the offer, such as governance, transparency, and the social implications of private equity ownership. In almost all cases, the wings have another buyer.
With experience with UK-based Pets At Home, KKR, a potential rival bidder for Zooplus, was revealed to have resigned after the board accepted the first sub-octane offer.
A better process is for the board to announce that there is an offer, admit that it is effectively for sale, and test the body of water to see if the auction will take place. This is common in the United States.
The defective bidding process is bad enough. What is intolerable is the ethical vacuum that allows large tobacco to dominate Vectura.
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ALEX BRUMMER: Bad turn of tobacco
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