Wellcome bid heads for court

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The Independent Online
THE BATTLE for Wellcome, the pharmaceutical group that received a hostile £9.2bn takeover bid from Glaxo last week, is likely to be fought out in court in the next fortnight.

Wellcome Trust, owner of 39.9 per cent of the quoted company, is to go to the High Court to seek permission to vary its ruling trust deed so that it can accept the Glaxo offer.

But John Robb, Wellcome's chairman and chief executive, has made it plain that he intends to use every avenue to thwart the bid. He said: "We reserve our position on whether to take legal action, but Sir Henry Wellcome must be spinning in his grave at these developments."

The late philanthropist formed the trust in 1936, to own the pharmaceutical company and dispense its profits for research. The trust sold 25 per cent of the company when it floated it on the stock market in 1985. Six years later, the trust sold another 35 per cent, with court permission.

Sir Roger Gibbs, the trust's chairman, said he had been advised no make no comment because the matter was "sub judice" in view of the pending court hearing. Sir Anthony Tennant, Wellcome's deputy chairman, said the reduction in research and development spending in the UK that the planned merger would inevitably lead to looked "rather ironic in terms of the trust's remit''.

If Wellcome decides to challenge the application and succeeds, the bid could fail. However, the trust is understood to have taken considerable legal advice and is convinced it will receive court approval.

While the stock market awaits Glaxo's formal offer document, Mr Robb will attempt to seize the initiative by bringing forward Wellcome's 1994 results from March to this week. Analysts already expected an increase in pre-tax profits from £667m to around £700m, but it is likely that this figure will be exceeded as the company attempts to put its performance in the best light.

Before the bid, Ian White, an analyst with Robert Fleming Securities, adviser to the Wellcome Trust, was forecasting pre-tax profits of £675m for 1994 growing to £815m in 1995. In a bullish research note, he says patients are expected to benefit dramatically when they take the Aids drug Retrovir in combination with other drugs. He forecasts that sales of Retrovir will treble over the rest of the 1990s.

Wellcome also hopes to put out further items of good news on drugs in development, as it tries to convince a sceptical City that the Glaxo offer undervalues it. On Friday, it announced UK and Irish approval for its herpes treatment, Valtrex.

Wellcome, which is fast losing hope of maintaining its independence, is also trying to attract higher bids from elsewhere.

Sir Anthony said he was "pretty confident'' about this. "There are a number of companies that will be seriously interested.''

He said Glaxo's offer of 1,012p in cash and shares for each Wellcome share was "not a fancy price for this industry". However, analysts remain sceptical about a rival offer. Wellcome shares closed the week at 998p - below the offer price.

Sir Anthony also criticised the behaviour of the trust. At the company's meeting with the trust the previous week, he said Sir Roger had given no hint of his talks with Glaxo.

Sir Richard Sykes, Glaxo chairman, said: "There will obviously be job losses." He declined to say how many.

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