Martin Flanagan: Predators are on the hunt as life sciences start to look vulnerable

Published on Tuesday 5 July 2011 21:39

FIRST, the Japanese were in for ProStrakan. Now it is the turn of the Americans to run the rule over Axis-Shield. The Scottish biotech sector? Dull, it ain't.

KHK of Japan persuaded local drugs developer ProStrakan that having an international parent with deep pockets was a good idea, while it gave the Japanese group access to the European market.

But Alere, the US stalker, has not yet persuaded Scottish medical diagnostics group Axis-Shield that it is offering a fair price.

The share price movement tells a similar story, jumping to a ten-year high of 505.15p yesterday after Alere's 460p in cash-per-share approach was made public. The stock later closed up 49.25 per cent, or 165p, at 500p.

It suggests the market feels Axis-Shield is a desirable acquisition for any number of foreign giants, partly attracted by the Scottish group's Afinion machine, which can run a number of tests for different conditions at the same time, from rheumatoid arthritis to vitamin deficiency.

Axis-Shield has recently won permission to sell the Afinion machine in China for diabetes testing, which is also a useful calling card for would-be suitors. In addition, the group is also developing a new lipid test to measure cholesterol levels as an indicator of heart disease.

Other possible predators in the frame with Alere for Axis are said to include Siemens of Germany, Teutonic rival Abaxis, US life sciences group Abbott, and Roche of Switzerland. It is quite possible that a little auction could be got going here, so investors should sit back and see where things go.

Alere, itself, has not ruled out going hostile, although it would prefer an agreed deal. It offered a 37 per cent premium to where Axis's share price was trading at yesterday's opening, which is hardly cheapskate but may well not be enough to carry the day for another quoted Scottish biotech to fall into foreign hands.

Ashley recognises a premium opportunity amid tough market

AT FIRST blush it looks like Mike Ashley's Sports Direct wants a little polish on the escutcheon with his purchase of majority stakes in two upmarket clothing groups controlled by Scottish tycoon Sir Tom Hunter.

Sports Direct, though highly successful, tends to be at the lower end of the sports retailing market. But such ethereal considerations as wanting a more glossy image are not the way that you suspect Ashley works.

It is much more probable that his antennae have picked up the success of premium brands in a challenging market, typified by the likes of JD Sports and Superdry, and he feels the time is right to spread his wings to include the premium and luxury sector of the market.

Hunter's West Coast Capital (USC), a branded fashion business, and Cruise Clothing, a luxury retailer the Scot also controls, fit the bill well with their upmarket brands such as Diesel, Adidas and Ugg.Ashley is also shrewd enough to keep Hunter on board with a retained 20 per cent stake in each of the businesses, able to plug into the latter's advice on a sector of the market the Sports Direct boss, also owner of Newcastle United FC, does not know particularly well.

Further showing that this Scottish foray is no one-off, Sports Direct has set up a premium and lifestyle division to presumably expand this new earnings channel.

Exporters right to expect shelp in boosting Scottish economy

THE strong Scottish manufactured export data for the first quarter of 2011 is welcome, and CBI Scotland assistant director David Lonsdale is right to use it to call for more government pump-priming for the sector, not least in air links with overseas.

Such initiatives are vital if we are to rebalance the economy north of the Border away from the traditional over-reliance on public services.

Therein lies the best chance of being able to create a strong, sustainable Scottish manufacturing sector, rather than one that periodically shines but then hits a bleak patch (as in the second half of last year).

The latest CBI data suggests Scottish manufacturing has managed to shake off the recent well- chronicled rise in input costs.

If the sector can achieve the strong exports growth virtually across the board when input prices are a serious headwind, think what it can achieve if all the background infrastructure is operating more in its favour.

Food, drink, tobacco, chemicals, refined petroleum, nuclear fuel, metals, paper and printing - they all put in a good exports shift in the first quarter, with only mechanical engineering and electrical and instrument engineering falling back.

The public policymakers should take note.