Reckitt Benckiser’s $1.4bn settlement over Suboxone verges on the farcical
One can say it is entirely logical for the board of Reckitt Benckiser to write a cheque for $1.4bn (£1.1bn) to end US authorities’ investigation into how opioid treatment Suboxone Film was marketed by a former subsidiary. One can also call the outcome ridiculous.
The logical aspect lies in the commercial opportunity to make a serious legal headache go away with no admission of wrongful conduct. Fighting the US Department of Justice (DoJ) and Federal Trade Commission (FTC) in front of a jury would be a high-risk strategy for a UK company, especially against the backdrop of an opioid crisis in the US that has claimed 200,000 lives. The detail that Suboxone was meant to be treating addiction could become lost in the anger.
For Reckitt, a conviction would have been doubly dangerous, because other products in its portfolio, notably an infant milk formula, would have been thrown off US government-backed healthcare programmes. So, yes, the board is entitled to say a settlement with the DoJ and FTC, covering the 2010-14 period, is “in the best interests of the company and its shareholders”. Investors thought so, and the shares rose by 2.5%. Incoming chief executive Laxman Narasimhan will arrive to a cleaner in-tray.
Yet the cosy conclusion is deeply unsatisfactory. The central allegation here was serious. It was that Indivior, the former subsidiary, made bogus claims about how the film (as opposed to tablet) formulation of Suboxone was less prone to being abused and that the drug was promoted via fraudulent marketing. That’s the gist of the charge against Indivior, which was demerged from Reckitt in 2014 and which has pledged to defend itself vigorously.
Reckitt’s settlement means its own furious claims of innocence will never be tested in court. Indeed, charges weren’t even brought. Yet $1.4bn of shareholders’ money will be handed over anyway. And, because there is no admission of wrongdoing, there is no basis on which to reclaim former Reckitt executives’ multi-million bonuses.
This the way the US system works, and we’ve seen it many times. It’s farcical.
Jill McDonald is the latest exit from M&S’s revolving door
Jill McDonald was “exactly the right person” to lead Marks & Spencer’s clothing business, chief executive Steve Rowe declared two years ago. M&S even footed a potential £1.7m bill for buying her out of share awards at her former employer, Halfords. And now McDonald is exactly the wrong person. She has been ousted and Rowe will do her job himself for a while.
The catalyst seems to have been a botched jeans promotion in February in which the company ordered insufficient quantities of lines that sold well. That, though, has been a familiar theme at M&S over the years. As Rowe says, supply-chain hiccups and the non-availability of popular products are “longstanding issues” in the clothing division.
Attempting to stay cheerful, shareholders might regard McDonald’s swift exit as evidence of a new ruthlessness in the M&S boardroom under Rowe and chairman Archie Norman. The trouble is, the theory doesn’t stand up to scrutiny. M&S’s clothing chiefs have always arrived and departed with astonishing regularity; the survival period of those who fail to make their mark has always been about two years.
A real innovation would be to hire a fashion chief who lives up to the hype.
Brexit Britain may not be ideal to float
Roll up, roll up! Who wants to buy shares in a safe-looking UK business with a dividend yield of about 9%? Not enough people, it seems.
Swiss Re, the giant financial group, has pulled the £3bn flotation in London of its UK-based unit ReAssure, one of those closed “zombie” life insurance businesses that tend to be reliable earners for the parent. The Swiss blame “heightened caution and weak underlying demand” in the UK market for flotations.
A buyer’s strike would be understandable when you remember that Aston Martin has halved in value since floating last autumn, and lending platform Funding Circle has fared even worse over the same period.
But ReAssure has nothing in common with either. In theory, it should have been straightforward to sell a 25% stake, or £750m-worth of shares, in ReAssure in a supposedly deep and liquid market like London’s.
What went wrong? Probably two things. First, the Swiss were too greedy on price. Other closed-book insurers are available and also come with fat dividend yields. Second, Brexit, the Westminster pantomime, and the falling pound are finally deterring international investors. In the current climate, a dull UK life insurer is nobody’s idea of a must-buy.
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