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Glaxo to get hostile?
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February 27, 1998: 8:36 a.m. ET
Glaxo Wellcome reportedly mulling hostile takeover bid for SmithKline
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NEW YORK (CNNfn) - Glaxo Wellcome Plc may be mulling a hostile takeover bid of SmithKline Beecham Plc in an effort to appease shareholders angry over the breakdown of merger talks between the two pharmaceutical giants.
According to the British newspaper The Independent on Friday, Glaxo may attempt to push through a hostile, no-premium takeover bid after the two firms canceled their proposed $70 billion merger, which would have created the largest pharmaceutical company in the world.
Neither company would comment on the speculation.
Glaxo is looking at putting forward the same terms as in the original merger, where its shareholders would get a 59.5 percent stake in the combined company.
However, Glaxo would not offer a premium on SmithKline's share price since it believes that the extra cost could wipe out any potential cost savings from a merger, the paper said.
Glaxo shareholders became upset after talks broke off, not only because of the failed deal but also because cancellation of the proposed merger wounded the stock prices of both Glaxo (GLX) and SmithKline (SBH).
The shares of the companies rebounded in London trading Friday morning after word of the possible new takeover bid emerged, driving the benchmark FTSE 100 higher.
If the deal were successful, Glaxo would then toss out SmithKline's current management, including its chief executive officer Jan Leschly, according to the report.
Leschly and another executive, operations director Jean Pierre Garnier, were apparently a major reason for the deal's unraveling. Glaxo was concerned that Leschly, who was known as a micromanager of SmithKline's operations, would attempt the same type of control over the combined company. That would have clashed with Glaxo's more decentralized management structure.
However, analysts were doubtful that a successful hostile takeover will ever come to pass, saying that SmithKline would put up a strong fight and that such a takeover could hurt earnings for years to come.
Glaxo, headquartered in London, develops and manufactures a wide range of gastro-intestinal and respiratory medicines, among other products.
The Brentford, England-based SmithKline, one of the world's leading drug makers with $11 billion in sales in 1997, manufactures brand-name over-the-counter medicines, including the popular Geritol vitamin supplements, Contac cold and flu remedy and Tums antacid. 
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