Glaxo Sounds Out Investors Amid Hostile Bid Talk

Glaxo sounds out investors amid bid talk

Glaxo Wellcome executives recently met investors in Edinburgh to sound them out over the merits of a hostile bid for SmithKline Beecham, fund managers said.

They said Glaxo did not spell out exactly what its plans were, but added that following talks with the Edinburgh investment community, the indications were that a hostile move was unlikely.

I certainly got the impression that a further bid (for SmithKline) was unlikely although they are looking at it, said one Edinburgh-based fund manager. It was strongly implied that they wont do it.

A Glaxo spokesman declined to comment on any results or comments from the investor meetings.

 

Speculation has been rife in markets that a hostile bid for SmithKline might be made, mainly because of an estimated 1.5 billion pounds of cost savings.

A planned merger between the two pharmaceutical companies collapsed on February 24, reportedly over personality clashes among management.

British fund managers have said a hostile bid by Glaxo for Smithkline was probably the wrong option, given the likely premium it would be forced to pay for a deal which many had considered was a done deal.

Smithklines share price has surged in recent days hitting a high of 808 7-8, up from 724 on February 24.

Several institutional investors said Glaxos management had acknowledged in the meeting there would be problems associated with a hostile bid.

One said Glaxos chairman, Sir Richard Sykes, had acknowledged the difficulties of avoiding post-merger hostility in what was essentially a people business.

Others declined to spell out exactly what came out of the meetings, designed to give Scottish fund managers the chance to question Glaxo about the merger collapse and discuss options for the company.

We chatted about other options although nothing concrete came out of it, said Stan Pearson, investment director at Scottish Widows Investment Management.

He said Glaxo management appeared to have taken on board some of shareholders main concerns about a possible further bid.

Scottish fund managers said they would be meeting SmithKlines management in London next week.