Fears over 1,600 jobs as Glaxo swings pounds 500m axe
Friday 01 September 1995
Deputy City Editor
The fate of 1,600 staff at the former Wellcome research centre in Beckenham, south-east London, will be decided this month as Glaxo announces annualised cost savings of pounds 500m from its pounds 9bn takeover of the drugs company.
The savings, expected to be announced with interim figures next Thursday, have been achieved in the face of a rising tide of resentment at Wellcome sites where a quarter of the workforce are expecting to be made redundant by the end of September.
Five months after the takeover, Glaxo is also expected to reveal the cost of the integration - with analysts pencilling in a one-off provision of pounds 900m, of which pounds 200m will be taken against first half figures, the first since the hostile bid.
Staff at Beckenham were angry yesterday that they had not been informed of the departure of one of the company's most renowned researchers before news leaked out in the press. Dr Salvador Moncada, who pioneered understanding of the role of nitric oxide in the human body in the late 1980s, is leaving to set up a research laboratory at University College London.
Staff who knew Dr Moncada said his departure reflected a general "anti- Glaxo" feeling at the site, which is to be closed as part of the cost- cutting that has followed Britain's biggest-ever hostile takeover in March.
The loss of Dr Moncada highlights the difficulty Glaxo faces in persuading former Wellcome employees to stay at the enlarged group. Appointments already announced by the company have been heavily biased towards former Glaxo employees.
More than a quarter of the 1,600 jobs at Beckenham are now expected to face the axe, with the remainder transferring to Glaxo's new state- of-the-art research centre in Stevenage. Glaxo is expected to give a firm forecast of the numbers to be laid off from the combined group's 17,000 UK employees at next week's meeting.
A source at Wellcome's development and manufacturing plant in Dartford said a similarly gloomy atmosphere pervaded that site. A union representative at the plant accused Glaxo of failing to consult with workers and said that the management had only started detailed discussions over redundancies and terms after it had threatened legal action a month ago.
He added: "Six months ago, Wellcome was a viable company making good profits. Now we have effectively been gutted by Glaxo."
Although bitter at the way Wellcome is being dismembered by Glaxo, staff admitted that the severance terms were generous. A scientist aged 50 with 20 years service, for example, could walk away with two years salary.
A resource centre has been set up at Beckenham to help staff find other work, and Glaxo is also prepared to fund courses for people leaving the company who want to retrain.
Interim figures next week will include Wellcome for about 3.5 of the 6 months period. They are expected to show pre-tax profits before exceptional items 35 per cent higher at pounds 1.14bn. Taking account of the shares issued during the takeover, earnings per share should be about 18 per cent higher.
Analysts now believe Wellcome's prospects were substantially undervalued by the stockmarket at the time of Glaxo's hostile swoop. They now agree with the company's claim that the Wellcome Trust, its largest shareholder, sold it out on the cheap.
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