Jilted giant blames Glaxo

Pharmaceuticals giants Glaxo Wellcome and SmithKline Beecham called off their Pounds 120 billion merger this week because of problems in agreeing to a board structure for the new company and irreconcilable differences in management philosophy and corporate culture.

A terse, one-sentence statement from Glaxo Wellcome contrasted with a more substantial comment from SmithKline Beecham, fuelling speculation of a row between the boards of the two companies. SmithKline Beecham said its board had "unanimously" decided that it was unable to recommend the proposed merger to its shareholders.

SKB said that at the start of discussions, the division of roles in the merged company had been agreed. It was also agreed that the board of the combined group would be drawn from the boards of both companies. In addition, said SKB, five executive directors were named whose role had been discussed, documented and agreed upon in detail prior to the merger announcement.

SKB said, however, that on February 20, "Glaxo Wellcome indicated that it was not prepared to proceed on the agreed basis. In discussions since then, and despite considerable effort on the part of SmithKline Beecham... Glaxo Wellcome has been unwilling to proceed in accordance with the agreed arrangements".

SKB highlighted differences in company culture and management styles and added:"Most importantly Glaxo Wellcome's recent conduct of these discussions has inevitably strained relations between the two companies." SKB has reached the view that "insurmountable differences have arisen that would undermine the effective management of the merged group and impair its ability to deliver shareholder value".