Glaxo and SmithKline directors could make millions from a mega- merger

Directors of Glaxo Wellcome and SmithKline Beecham stand to make millions from share options, depending on how the proposed mega-merger between the two companies is structured. Nigel Cope and Andrew Yates report.

Executive directors of the pharmaceutical giants could net almost pounds 35m between them from the exercise of share options if the pounds 117bn merger is effected by a "newco" being formed to take over both groups. Options could also be triggered if one company ends up controlling more than 50 per cent of the enlarged group, signalling an effective takeover. SmithKline options will be triggered as both boards have agreed Glaxo shareholders would control 59.5 per cent of the new group.

Glaxo directors are also likely to receive massive pay increases to bring their rewards into line with their more lavishly remunerated counterparts at SmithKline.

It is SmithKline's directors that hold the largest tranche of options. They are sitting on combined share option profits of pounds 30m, according to figures published in the group's annual report. Glaxo directors stand to gain around pounds 4m.

Jan Leschly, SmithKline's chief executive, would be the biggest beneficiary. At the closing share price yesterday he held paper profits of almost pounds 17m including profits from US securities. Jean Pierre Garnier, chief operating officer, could make pounds 6.35m while Hugh Collum, the finance director could make pounds 3.3m.

Glaxo's executive chairman, Sir Richard Sykes, is sitting on options worth pounds 478,000. Dr James Niedel, research and development director, could net pounds 2.6m while Robert Ingram, another executive director, holds options worth pounds 1.4m.

The companies would not comment on possible payouts. Glaxo conceded it was accepted practice for options to be exercised if the deal was structured as a "newco" takeover.

If the merger goes ahead there are likely to be huge pay increases for the Glaxo executives who earn significantly less than their SmithKline counterparts.

Sir Richard Sykes was paid a total of pounds 1.1m in 1996 compared with Jan Leschly's pounds 2.1m. They will be executive chairman and chief executive respectively of the new group. Sir Richard would need at least to double his salary to take him ahead of SmithKline's Dr Jean Pierre-Garnier, who will be one of the merged group's executive directors. He earned pounds 1.96m last year.

The scale of the potential pay increases and options payments was criticised by some institutional investors yesterday. "This wouldn't be a reason they are doing the merger, would it?" one asked.

The deal could also lead to a pounds 400m fees bonanza for the company's advisers, including Lazards and Morgan Stanley.

Details of the pay bonanza emerged as pharmaceuticals shares soared. Glaxo was the major beneficiary of the market's new "drugs high" with its shares rocketing by 20.7 per cent to 1983p.

The surge added pounds 12bn to the company's market value while SmithKline's shares rose by more than 8 per cent, increasing its value by pounds 3.6bn. At these levels a combined Glaxo-SmithKline would be worth pounds 117bn.

Outlook, page 25

Start your day with The Independent, sign up for daily news emails
News
A poster by Durham Constabulary
news
Arts and Entertainment
books New York Times slammed over summer reading list
Sport
Cameron Jerome
footballCanaries beat Boro to gain promotion to the Premier League
Arts and Entertainment
Performers drink tea at the Glastonbury festival in 2010
music
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine