Sykes merger warning shocks GSK

Executives at GlaxoSmithKline have been privately expressing their surprise over comments from its former chairman Sir Richard Sykes, in which he suggested the merger which created the drugs giant had been forced on him by bankers and may never create value for shareholders.

The apparent repudiation of the deal in 2000, which marked the culmination of a merger spree as chief executive of Glaxo Wellcome, stung Sir Richard into clarifying his remarks yesterday and saying: "I was 100 per cent behind that merger and I still am."

Sir Richard, now rector of Imperial College, said he was only describing the intense City pressures on companies to do mergers and acquisitions. His comments came after he penned a report on the ills of the financial services industry, one of which was the destruction of shareholder value by ill-advised corporate activity. Sir Richard said in an interview that bankers had bullied Glaxo Wellcome's non-executive directors to do a deal, 18 months after the collapse of the its first attempt to merge with SmithKline Beecham.

He said: "The problem is you've got all these people swilling around driving you to do it. And they want it done, because they get a lot out of it. And the poor old non-execs get pulled along with all this stuff. I think there were one or two non-execs who had the guts to say: 'I think we're fine as we are'. But it is difficult for them when all these bankers come in and produce 400 nice slides on why this should be done." GSK says the merger created a massive research and development organisation which is starting to yield results.

Sir Richard said yesterday: "Financially, the deal was a success, because it saved a lot of money, but that is not what the merger was about. The pharmaceuticals industry is a special case. It is working to a 15-year timeframe between discovering something and getting a drug to market. It is going to take a long time to judge its success."