Week ahead: Glaxo SmithKline FD reflects on merger

Glaxo financial director and John Coombe, also chairman of the FTSE 100 group of finance directors, will reveal the company’s quarterly results next Thursday. On the same day future partners SmithKlineBeecham releases its results. Both are dominated by one thing – merger.

Mulling over the market’s lack of reaction to the £130 million deal, Coombe believes the announcement lacked surprise and was caught by an upsurge interest for all things hi-tech.

‘Normally there is uncertainty when you announce a merger,’ he explains. ‘We had tried to do this deal two years ago, so it was well heralded. When it was announced it was a bit of a damp squib. The market overlooked £570m worth of manufacturing savings and £250m research and development savings we intended to reinvest.’

The big sting came from an unexpected stampede to dot-com and related stocks. ‘Vodafone-Mannesmann got together just as our merger was being absorbed by the market’, he explains. ‘All the index trackers suddenly had to find money and they took it from the blue chip firms.’

He believes sense and reason have now prevailed. When the merger goes through later this year, Coombe will still stay based in the UK but will keep a busy schedule commuting to see new chief executive Jean-Pierre Garnier, presently number two at SmithKline, and some of the new company’s finance operation split with the US.

Redundancies will occur in financial departments and across the whole organisation, but Coombe says rationalisation will occur around the world and could fall on either side of the Atlantic.

‘People recognise that when you merge you have casualties’, he explains. ‘It’s a part of the process of efficiency and competing in the world economy. You either do it to yourself or have it done to you.

Does it matter anymore where a multinational bases its HQ?

‘We’re obviously proud to be a successful UK company,’ he says guardedly. ‘But, our markets are global, with 50% of our sales in the US. We’re moving towards a global economy and ideally one day a global stock exchange.’

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