Glaxo Wellcome: Consolidatory But No Panacea

30 January 1995

Glaxo is not known for being acquisitory when it comes to its relationships with other companies; its last acquisition was an American company back in 1977, recalled its chief executive Sir Richard Sykes, after some debate with his colleagues, at last week's press conference announcing Glaxo's bid for Wellcome (see page 3). However, this has not prevented Glaxo from joining the ranks of the megamerger players who have invested a grand total of over $46 billion in acquisitions in the past five years (see table). Glaxo will head the table of spending on megamergers if its $14.1 takeover of Wellcome goes ahead.

If successful, the deal will focus on cutting costs, as has been the case with the acquisitions last year of Syntex by Roche and American Cyanamid by American Home Products. Some analysts suggest that there is potential for savings of around L600 million, while others say that Glaxo will need to make savings of L800 million ($1.3 billion) to avoid a negative impact on earnings.

The two acquisitions in the USA have seen tremendous job losses (Marketletters passim and see pages 6 and 7). With a total head count of 61,500, 44,000 from Glaxo and 17,500 from Wellcome, it is estimated that 10,000-15,000 jobs could go at the combined company. Many of these could go from research. After its acquisition of Syntex, Roche announced 5,000 job cuts, with around 40% of the employees affected being researchers.

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