Wellcome says £9bn not enough
Friday 27 January 1995
Taking the unusual step of throwing in the towel even before Glaxo had posted its official offer document, Wellcome called on its largest shareholder, the Wellcome Trust, not to sign away its 39.5 per cent stake to a bid it said undervalued the company.
Wellcome's shares jumped 32p to 986p as the prospect of a rival bid improved. Despite the rise, they still stand at a discount to the value of Glaxo's offer, worth £10.12 on the basis of Glaxo's share price, which closed 16p higher at 616p.
Mr Robb said he had only been informed of the Trust's decision to sell out of Wellcome on Monday morning as Glaxo was announcing its unexpected bid. He had been taken completely by surprise.
Glaxo said it was disappointed by Wellcome's rejection of its cash and shares offer, but said it still expected the Wellcome Trust to confirm its acceptance.
Sir Richard Sykes, chairman, said: "Glaxo remains convinced that the proposed merger is not only in the best interests of both Wellcome and Glaxo shareholders, but that it will also secure Britain's leading position in the pharmaceutical industry, which is undergoing fundamental change across the world. The commercial logic of our bid is clear".
The Trust said on Monday that it would accept Glaxo's offer unless the Wellcome board provided information before midnight last night to persuade it to change its mind. Wellcome's attempts to contact the Trust yesterday morning to do so were frustrated by the Trust's adviser, Robert Fleming, which insisted that all negotiations were conducted second-hand between the two sides' bankers.
Mr Robb is thought to be furious at the Trust's decision to renege on a memorandum of understanding in which it promised to remain a long-term shareholder, not to solicit or encourage any takeover of Wellcome for five years from 1992, and to try to ensure that any sale of shares did not result in a third party holding more than 10 per cent.
He said: "Many are sad that the Wellcome Trust is severing its links with Wellcome after a long and close association. But we are pursuing opportunities to achieve the best offer for the company. The Wellcome Trust should help us in this objective and not limit its own and other shareholders' options."
Wellcome said the Trust had nothing to lose by holding back its irrevocable commitment and called on it to decline to give Glaxo a firm agreement to sell.
Analysts were sceptical about Wellcome's prospects of finding a white knight with deep enough pockets to challenge Glaxo's offer, despite the company's claim that "there are more prosperous companies in the industry than you might imagine".
According to Wellcome, the bid undervalued the company on several measures. Other recent bids have attached higher price-earnings multiples to target companies and paid higher premiums than the 49 per cent increase over Wellcome's earlier share price represented by Glaxo's offer.
Mr Robb said a reference to the Monopolies and Mergers Commission remained a possibility on the grounds that a takeover would diminish the research potential of the industry as a whole.
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