Glaxo began canvassing shareholders about a hostile deal after talks with SmithKline broke down two weeks ago. Its move came in response to outrage from shareholders after the merger talks collapsed. Shareholders were keen to explore ways of recouping some of the pounds 15bn wiped from the value of their holdings since the merger talks crumbled.
SmithKline retaliated by launching its own institutional charm offensive, stressing that it had a strong future as an independent company and that its board was fully behind the decision by chief executive Jan Leschly to call off the talks.
Several large shareholders are understood to have been in favour of a hostile bid by Glaxo. However, the majority of fund managers have been lukewarm about the proposals and it became increasingly clear to Glaxo that the plan was becoming less viable.
Shareholders have been concerned about the prospects for the combined group. The main fear has been that the gulf in management style and culture between Glaxo and SmithKline was too wide to bridge the gap, even if there was a clear out of SmithKline's top executive team. A hostile bid could also have created up to pounds 45bn of goodwill which would have depressed earnings for many years. "The deal is effectively dead. The institutions did not want it," said one City source.
An institutional shareholder in Glaxo said: "There are growing worries that without the co-operation of both management teams a merger would create severe practical difficulties that we don't want to discover a few years down the line."
Another fund manger said: "We just want the two companies to get on with things as independent groups. Sometimes these things are not meant to happen."Reuse content