Glaxo-SB deal talk flares as Leschly departs

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The Independent Online
A REKINDLING of merger talks between SmithKline Beecham and Glaxo Wellcome, the UK's two largest drugs companies, moved a step forward yesterday after confirmation Jan Leschly will step down as SB chief executive in April to pursue his interest in the Internet.

One industry source with knowledge at last year's abortive merger talks said: "Every company has been looking around and I think people wouldn't want to wait too long for a deal." Institutional shareholders are believed to have been putting pressure on both Glaxo and SB to get together following the recent bid frenzy over Warner-Lambert, the US pharmaceuticals group. "The lesson we have to learn from the US experience is that if the institutional shareholders want a deal, they will win the day," the source said.

Glaxo Wellcome declined to be drawn on a possible tie-up yesterday. SmithKline Beecham shares, already buoyed by merger speculation, gained a further 39p to close at 881p, while Glaxo ended 33p firmer at 1898p.

Previous merger talks between the companies collapsed in February last year with, Mr Leschly's proposed role in the group believed to be the stumbling block.

Jean-Pierre Garnier, SB's chief operating officer who is as expected to succeed Mr Leschly, said yesterday he was not averse to a deal. "As an independent company SB can deliver 13 per cent earnings growth this year, and more the year after," he said. "But the environment is changing and we have to have a watching brief. If a merger opportunity arose, we'd be looking for long-term value creation, not short-term synergy benefits."

Mr Leschly has come under fire as Britain's highest paid executive. However, Mr Garnier is to receive a comparable salary to Mr Leschly, who last year received a total package of pounds 1.9m, excluding options. Mr Garnier said: "We're not defensive about paying global rates."

Mr Leschly is thought to be hatching plans to build on his reputation by pursuing an Internet healthcare venture. A spokesperson declined to rule out a website named after Mr Leschly. "It's not so far-fetched. There are many medical professionals in the US who have established themselves on the web."

SB said it would be against its culture for Mr Leschly to become chairman of the group having enjoyed an executive role. Mr Leschly would have been obliged to retire in September at his 60th birthday. However, the company said the board brought forward his departure to coincide with the AGM and a scheduled internal managers conference which would give Mr Leschly a chance to bid farewell.