The bulls survive M&A trauma

Well, you win some and you lose some. Holders of Glaxo shares might reasonably consider themselves to be among the losers, even though the price has performed pretty well over the past year or so.

Still, a 10 per cent dive on the back of the ending of merger talks with SmithKline Beecham was hardly good news. And don't you just love the language. Cultural differences? Failure to determine who would be head honcho in advance, more like.

Actually, Glaxo was the top dog, so it could hardly have been a surprise to learn they expected to be in the driving seat. The trouble appears to be that they wanted to provide most of the passengers as well. After all, SmithKline Beecham was not just a drugs company. Strip out toothpaste and Lucozade from the SKB portfolio and their pharmaceuticals operation becomes dwarfed by Glaxo.

And you couldn't possibly have executives from a company where one of the best selling brands was Ribena running parts of a multinational drugs business. Unfortunately, the deal had been billed as a marriage of equals, so a climbdown was the only way out.

There is certainly an insurance merger in the offing. In one of the worst kept secrets of the week, Commercial Union announced it would be bedding down with General Accident. Using the mechanism of a share offer from CU, a new company is to be formed entitled "CGU". It could have been worse. In the past, Commercial Union has been known as CUACO and its Perth- based partner GAFLAC. Imagine gluing those two acronyms together as a corporate identity.

All of this feverish activity has been enough to push markets on both sides of the Atlantic into new high ground. In America the hostile takeover is back - usually an indication that share prices are oversold, which couldn't be further from the truth.

It is even returning in some measure in this country, with Argos the subject of unwelcome attention of GUS and some of our more enthusiastic market watchers suggesting that SmithKline Beecham could be in play. After all, they have been left at the altar twice.

We must be getting very blase on the M&A front in this country. But it has shown that as one door closes, another opens. Predictions that the collapse of the drugs merger would provide a needle with which to pierce the stock markets' apparently indestructible bubble proved to be wide of the mark.

The bull case was given further endorsement this week by that other insurer, GRE, offering to repay close to pounds 200m to shareholders. Heavens knows if a bull trap exists out there, but it seems as though our rampant animal managed to side-step the opposition - this week at least. But don't ever forget that a trend is only a trend until it stops.

Brian Tora is chairman of the Greig Middleton Investment Strategy Committee.