Only a legal block or a bid from a white knight can stop the Trust now irrevocably handing over its stake in Wellcome. Neither looked very likely mid-week. The initial view was that the £9.2bn cash-and-shares offer was fully priced. Wellcome was slow offthe starting blocks, but its campaign to convince the world that the bid undervalues it is now gathering steam.
The bid may not be quite the walkover it first appeared to be, but the consensus is that Glaxo will probably still end up owning Wellcome without having to lift its offer.
That's when its problems will really begin. For the board of Glaxo looks curiously unsuited to make this merger work - to get stuck in and make two plus two equal five.
The combining of the two businesses may yield benefits on the product development side. There may be synergies in getting the two companies' sales forces to sell each others' products. But the real fuel driving the merger is the scope for drastic cost-cutting.
The merger would create duplication everywhere - in R&D, manufacturing, sales and administration. With the pharmaceuticals industry changing so fast, both companies would have to cut jobs even if they stayed independent. If they merge, they could shed 10,000 jobs between them.
For Glaxo, which for decades has known nothing but expansion and more expansion, that means a profound change in attitude and culture. Tough, uncomfortable decisions will have to be made about which labs, factories and offices are to close. Yet the executive ranks are dominated by scientists, not hatchet-wielding business people.
Glaxo's non-executive ranks look even more inappropriate. There you will find a former Chancellor of the Exchequer (Lord Howe), a former Governor of the Bank of England (Lord Kingsdown), a former US ambassador (Anne Armstrong) and a pro-vice-chancellor of Oxford University (Sir Richard Southwood). Businessmen with experience of cost cutting - not to mention fighting hostile takeover bids - are rather thin on the ground. Sir Richard Sykes has proved thoroughly able so far. But he is obviously more at hom e in the laboratory than in the City. When we met last week he seemed ill at ease explaining how the deal would increase shareholder value, but blossomed when describing the molecular structure of penicillin.
He and his boardroom colleagues will need to develop a very different set of skills if they are make a success of Wellcome.
Pru's sorry now
THE machinations at the Pru are fascinating. I'm still not convinced anyone has got to the bottom of Mick Newmarch's abrupt departure from the chief executive post on Monday. Mr Newmarch has gone to ground and is not available to tell us.
The reason, according to the Pru, is that he just came to the end of his tether dealing with the regulators. It was taking up huge amounts of time and proving very frustrating. The Pru had gone out on a limb by refusing to have anything to do with the fledgling Personal Investment Authority, preferring to be regulated directly by the senior watchdog, the Securities and Investments Board. The last straw, they say, was the Stock Exchange investigation into Mr Newmarch's dealings in Prudential shares last October. The Pru insists he did nothing wrong. The Exchange has yet to rule.
Mr Newmarch went of his own accord. "It was entirely Mick's decision to resign,'' Sir Brian Corby, chairman, tells me.
So how come he's now negotiating compensation for loss of office?
"It's not about compensation for loss of office; it's about the proper treatment of someone who has worked for the company for 40 years.''
Since his departure, Pru shares have fallen by 5 per cent, wiping £300m from the company's value. The reputation of the company has been damaged by the Exchange investigation. It will be further damaged if the regulator, Lautro, finds it mis-sold personal pensions to people opting out of occupational pension schemes - which the Pru denies.
With the facts as we know them, the idea of Mr Newmarch getting any pay-off at all is extraordinary. He was paid £834,000 a year to cope with obdurate, difficult regulators, not to go off in a sulk when things got uncomfortable - which is how his departure looks.
Whatever the Exchange says about the share dealing episode, Mr Newmarch was patently foolish to trade in Pru shares just before publishing new business figures, however innocuous.
Sir Trevor Holdsworth, chairman of the Pru's remuneration committee, will have to come up with some convincing reasons to give him a penny pay-off. The Pru's explanation so far doesn't contain any.
THE HISTORY of mergers in home improvements retailing is not a happy one. The cobbling together of the Payless and Do It All chains in the late 1980s was the most inept DIY botch job since my last attempt to put up shelves chez Hosking.
The auguries have not put off J Sainsbury, however, which last week paid Ladbroke Group £290m for Texas Homecare. It plans to subsume the 200 stores into its own Homebase format.
David Sainsbury tells me the parallels with Do It All (which was tactless enough to announce yet another loss on the very day of the Texas deal) are false. Do It All was a merger of two weaklings. Its problems were worsened by joint owners, who alternated the chairmanship, and by horribly incompatible computer systems.
The Homebase/Texas marriage has the benefit of one incontrovertibly successful format (Homebase). It is 100 per cent owned by Sainsbury and the two sides have similar computers.
So far so good. If the margins in the ex-Texas stores can be lifted anywhere near the 8 per cent achieved in Homebase - the target for 1998 - then the prospects are fantastic. It won't, of course, be that simple. Homebase is accustomed to opening 10, new, perfectly located stores a year. The task now is to convert 100, old, imperfectly located stores a year over the next two years. It also represents a huge expansion to more alien territory outside its South-east heartland. I reckon it will succeed, butit won't simply be a case of plonking the Homebase fascia over the old Texas signs.
Ladbroke will be pleased with the cash and its escape from retailing - for which it showed little talent and less enthusiasm. Advisers always claim that the deals they broker are good for both buyer and seller. This may actually be one that is.Reuse content