Garnier defends pay as merger slips by a month

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The Independent Online

The drugs groups Glaxo Wellcome and SmithKline Beecham postponed their merger by a month yesterday, less than three weeks after saying it would be completed in August rather than September. Despite the delay, JP Garnier, SB's chief executive, predicted his controversial share option package, which is linked to the merger, would soon find favour with the public.

The drugs groups Glaxo Wellcome and SmithKline Beecham postponed their merger by a month yesterday, less than three weeks after saying it would be completed in August rather than September. Despite the delay, JP Garnier, SB's chief executive, predicted his controversial share option package, which is linked to the merger, would soon find favour with the public.

SB and Glaxo said the deal to create GlaxoSmithKline, the world's biggest drugs company, would be completed on 25 September. Merger documents posted earlier this month put the completion date at 21 August. "I insist there are no new issues [regarding the delay]," said Dr Garnier, who will head the enlarged group. Agreement in principle had been reached with companies hoping to acquire the disposals required by regulators, he said. However, discussions with the US Federal Trade Commission were taking longer than expected.

It is thought the FTC has not responded favourably to the companies' proposed disposal programme, insisting instead on starting from first principles. Analysts said the new deadline was more realistic. "There's still no guarantee it won't slip further," said Martin Hall of HSBC.

Dr Garnier dismissed criticism of his £15m share options package, which he believed shareholders would approve at a meeting being held on Monday to rubber-stamp the merger. "The companies' key shareholders support the share options. No one's complaining. I'm more than optimistic the educated public will start to realise that England is not an island when it comes to executive pay."

Pensions and Investment Research Consultants, the shareholder activist group, this weekend said it would recommend shareholders vote against Dr Garnier's package.

Dr Garnier said he would not be browbeaten for what was appropriate remuneration within international companies like SB or Vodafone AirTouch. "I'm not a shrinking violet."

He added that SB would tell 1,500 of its administrative staff by mid August of the status of their jobs. In January the groups said the bulk of the merger's savings would come from cutting overlaps in administration.

SB shares closed up 18.5p at 822.5p after the group posted second-quarter results above forecasts. Pre-tax profits rose 18 per cent to £495m on sales 10 per cent up at £2.08bn. There was £156m of charges for share options vesting as a result of the merger.

Pharmaceutical profits rose 16 per cent following strong performances from Avandia, the new diabetes treatment. Profits from consumer products rose only 8 per cent.

Poor sales of Ribena, the blackcurrant drink, were offset by a 17 per cent jump in sales of Aquafresh dental products.

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