Some people, including the AstraZeneca shareholders, may be wondering why the Board effectively prevented the shareholders from taking Pfizer’s offer that would produce £55 a share. I bet a number of the shareholders are thinking that the gain they would have made on the sale of their shares is something that they should have had an opportunity to decide for themselves. This segues rather sweetly into one of my specialist subjects; ‘directors’ duties. The one we are looking at here is the duty to act in the best interests of the company as a whole. This is a concept that has troubled directors and lawyers over the years. Why is it not in the best interests of shareholders as a whole to accept an offer to purchase their shares at what may well be a significant profit?
There has been quite a lot of discussion in the press about the pressure on the AstraZeneca Board to enhance shareholder value over the next couple of years and whether they would be able to achieve a value in excess of the £55 per share that was back heeled. That is the point. If the directors believe that by continuing to trade without being taken over the long-term business results of the company will leave the shareholders better off then it is their obligation to reject the offer. So the message is long-term enhancement knocks short-term gain into the long grass. There have been a couple of cases that make first that point.
I suppose the other side of that coin is, if the directors had allowed the offer to go forward, some of the shareholders may have complained that the deal was not good enough and brought an action for breach of duty. That would have been a fun action to avoid.
Anyone with any queries about obligations as a director, either their own or their board’s, is very welcome to contact me at:
0845 634 1739