Predictions of drugs giants merger resurface

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The Independent Online

Analysts are hoping to see merger talks resurface between Glaxo Wellcome and SmithKline Beecham by the end of 2000 to create a drugs giant worth more than £100 billion.

Analysts are hoping to see merger talks resurface between Glaxo Wellcome and SmithKline Beecham by the end of 2000 to create a drugs giant worth more than £100 billion.

Shares in the groups soared in early December when it emerged that SmithKline Beecham chief executive Jan Leschly, reportedly one of the main reasons for the collapse of talks last year, was to retire at the end of April.

It is thought the previous talks collapsed as the two sets of managers wrangled over senior boardroom positions at the combined group.

But many in the City still think the issues surrounding a deal are more complex.

Jim Wood-Smith, analyst at stockbroker Greig Middleton, said: "These are two companies with totally different management styles and corporate cultures.

"It is too simplistic to say Leschly's departure makes a deal inevitable."

He pointed out that Mr Leschly's replacement, Jean-Pierre Garnier, had been shadowing his 59-year-old predecessor for a long time.

"JP has been Leschly's right hand man for ages - it is unlikely he'll think differently to his old boss."

Analysts see SmithKline as being a more centralised operation than Glaxo, meaning a change in culture and expensive restructuring would be needed to implement a merger of the two.

However, consolidation among other global players could force the British duo into combining.If America's Pfizer is successful in buying Warner Lambert, it would create a behemoth to dwarf both British groups.

One pharmaceuticals analyst said: "Glaxo and SmithKline would be the best possible fit for both sides. They've got complementary product ranges and complementary drugs pipelines, so itÿs simply the most logical deal."

Analysts predict that in a merged Glaxo-SmithKline, Mr Garnier would become chief executive, while Glaxo chief executive Sir Richard Sykes would be made chairman.

SmithKline Beecham is currently valued at £44 billion against Glaxo's £60 billion.

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