Here's more on the GLX hostile takeover:
March 1 1998
BUSINESS NEWS
Investors cool on takeover
Glaxo backs off
from hostile bid
Matthew Lynn
GLAXO WELLCOME, the pharmaceuticals giant, is
backing away from launching a œ50 billion hostile bid for its
rival SmithKline Beecham after the collapse of the merger
agreement between them.
Glaxo has been taking soundings from leading shareholders
to see if it could muster support for an all-paper offer for
SmithKline on the same terms as the original merger. But
investors appear reluctant to back a move that does not
contain any premium for control or any cash element. No
decision has been taken on whether to bid.
Sir Richard Sykes, Glaxo's chairman, has let it be known
to investors that he would still like to bring about a merger
of the two companies. Sykes has indicated he would be
willing to re-open negotiations but only if SmithKline was
run by a different management team.
The Glaxo camp is hinting to investors that they should put
pressure on the non-executive directors at SmithKline, led
by Sir Peter Walters, to replace Jan Leschly, the chief
executive.
The merger negotiations broke down last week after Sykes
insisted he did not want Leschly to be chief executive of
the merged company. Leschly then broke off the talks,
although SmithKline sources insist that this was done with
the full support of the board.
If a different management team were installed at
SmithKline, a merger could be bought about swiftly, but it
is unlikely SmithKline's non-executives will want Leschly
replaced as chief executive. The non-executives include
John Browne, BP's chief executive, Andrew Buxton,
Barclays chairman, and Sir Christopher Hogg, chairman of
Reuters and Allied Domecq.
Leschly has returned to America, where he is based,
although he has been talking to shareholders on both sides
of the Atlantic, pressing his view of what went wrong. The
SmithKline camp has been accusing Sykes of arrogance
and insisting on controlling the merged company himself.
That, they say, was in effect reneging on the deal and led to
the collapse of the merger.
Although analysts believe it is highly unlikely that Sykes can
get a no-premium hostile bid off the ground, they say
Leschly's behaviour over the last month has left SmithKline
uniquely vulnerable to a bid. In the past few weeks,
SmithKline has started and then ended merger negotiations
with both American Home Products and then Glaxo
Wellcome. Within the industry, there is speculation that
either Hoechst of Germany or America's Bristol-Myers
Squibb could bid for SmithKline. The City does not
believe that Leschly, who has failed after two sets of
negotiations, would have credibility if he proposed another
merger.
Glaxo supporters say the logic of the deal remains intact
despite the clash of personalities. Tony Blair was said to
favour the merger because he was keen to ensure Britain
does not lose its powerful world position in
pharmaceuticals.
Glaxo supporters argue a takeover would create the
world's most powerful players in the industry. Three years
ago, Glaxo made a œ9.5 billion hostile bid for Wellcome
and won after failing to agree a friendly merger.
Analysts say that given encouragement, Sykes would be
keen to pounce. "When you have had your nose tweaked
like this, it must be very tempting," said Robin Gilbert,
drugs analyst at Panmure Gordon.
SmithKline sources were saying this weekend that it was
unlikely to attempt a reverse bid for Glaxo. Having
launched a furious attack on Glaxo after the collapse of the
merger talks, SmithKline is working hard to cool the
hostilities between the two companies.
For the companies' 100,000 staff, an independent future
for the two groups would come as a relief. If SmithKline
and Glaxo were to combine, about 15,000 jobs would be
lost. |
