Wellcome spurns Glaxo, shops for higher offers

January 27, 1995|By New York Times News Service

LONDON -- Wellcome PLC yesterday rejected the unsolicited $14 billion takeover offer made Monday by Glaxo PLC as inadequate, but said it was putting itself up for sale in the hopes of attracting a better offer.

Acknowledging that it had no realistic hope of remaining independent since its largest shareholder, the Wellcome Trust, unexpectedly decided to sell its 39.5 percent stake, Wellcome instead sought to make Glaxo's offer the opening move in a bidding war among other pharmaceutical companies.

Analysts said Wellcome's decision was almost inevitable given the board's legal responsibility to seek the best price for shareholders.

But they said Glaxo still seemed likely to prevail because few other drug companies had the desire or the money to top its offer, which was at the upper end of valuations for the industry and clearly was intended to discourage a drawn-out battle.

"Having looked at the balance sheets of competing companies, it seems they don't have the capacity to pay at these levels," said one London-based analyst, who spoke on the condition of anonymity.

Sir Richard Sykes, Glaxo's chief executive, said he was disappointed in Wellcome's decision.

He defended the bid as being in the best interest of both companies' shareholders.

Russell Walls, Wellcome's group finance director, said there had not been any meaningful contacts with other possible bidders.

But he said that because of the drug industry's rapid consolidation, Wellcome believed other companies might come forward.

The combination of Glaxo and Wellcome, both based in London, would create the world's largest pharmaceutical company and would entail one of the two or three largest takeovers in any industry.

Glaxo's bid valued Wellcome at 8.9 billion pounds, or just over $14 billion.

The final price could rise to 9.4 billion pounds, or $14.9 billion, if all Wellcome share options that were outstanding in 1993 were exercised, Glaxo said.

The offer valued Wellcome at 10.25 pounds a share in cash and Glaxo stock, or about $16.20 a share.

Analysts said a competing bid could not be ruled out, given the intense pressures on drug companies to consolidate, to cut or spread their costs over a greater sales volume.

Governments, doctors, consumers and insurers are pressing drug companies to keep prices down at a time when the cost of developing new drugs is rising rapidly.

Underscoring the consolidation trend, Glaxo announced yesterday that it had offered to buy Affymax NV, a Dutch drug development company with its primary operations in the United States, for $533 million.

Analysts said Glaxo's bid for Wellcome was especially strong because it had all but locked up the 39.5 percent stake in Wellcome held by the Wellcome Trust, a charity.

The Wellcome Trust finances medical research and was established in 1936 by Sir Henry Wellcome, who endowed it with 100 percent ownership of the drug company he founded, Wellcome PLC.

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