Sir Nigel Rudd, the chairman of Alliance Boots, thinks that analysts are stupid to have failed to recognise the benefits of the merger of Boots with Alliance Unichem. A look at the returns that Boots shareholders have got suggests the analysts were right.

Presumably, Sir Nigel is saying that the stupid analysts failed to see the value of the merger, but the enhanced value of the group has now been recognised by the clever consortium taking it over (Kohlberg Kravis Roberts and Alliance Boots’ deputy chairman).

The problem with the argument is very clear if you look at Boots’ share price over the last two years: from after the merger was announced, but before it was completed. It has barely out-performed the FTSE 100 and it has under-performed the FTSE retail index despite the takeover.

Why exactly were analysts wrong to be sceptical? Those who did buy the shares in the run up to the merger would have done better to buy the sector index. If anything, the takeover has been done at a price that proves analysts’ assessments of the value of the merged business to have been better than that of Sir Nigel and his fellow directors.

Sir Nigel also says that sell-side analysts write a lot but do not realise that healthcare is a growing business as the population ages. I wonder if he has actually read much of the research analysts write. The effects of demographic trends of demand is a constant theme.

I would go so far as to say that a more accurate criticism is that analysts are far too accepting of the picture of growing demand for drugs. A good analyst would ask more questions. Will governments (who pick up most of the bill in Europe) will keep on paying rising bills? Might they might act to reduce prices? Will the British government allow more competition in the (regulated) pharmacy business? Boots does a lot more than sell drugs, so what are the prospects for its other sources of revenues? (Not very good).