Glaxo, SmithKline merge - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Glaxo, SmithKline merge

Dec 13, 2000

With the Federal Trade Commission (USA) finally, approving the Glaxo–SmithKline merger, the merger between Indian affiliates is also on the anvil. Infact, changes in the management structure in Glaxo have been happening over the last three months to put in place a structure for the unified entity. First, came the appointment of Mr. Thiyagrajan who took over from Mr. Khusrokhan as CEO of the company. Mr. Thiyagrajan, headed Glaxo operations in the South East Asia and his coming back to head Glaxo’s operations were seen as the parent’s desire to merge the operations of the two companies sooner than later. Next came the replacements of Mr. Bandopadhaya, VP, Information Technology and Mr. Anil Mathai, VP, Exports by SmithKline officials.

There have also been press reports that two divisions of Glaxo – the veterinary division Agrivet Farm Care and Qualigens Fine Chemicals are on the block. The management however, has denied these reports.

There is also the question of what happens to sister concerns of these two companies viz. Burroughs Wellcome and SmithKline Consumer. There is also another entity, SmithKline Beecham Asia, a 100% subsidiary of the SmithKline. (Glaxo, does not have a presence in India via a 100% subsidiary.) This however, is likely to serve as the 100% arm of the merged entity.

Burroughs was not merged into Glaxo in India because of the fact, that wages for the workers in Burroughs were higher than those in Glaxo. While the management was willing to make a one time payment, the workers were adamant. This prompted the management to keep the company separate, though the marketing operations of Burroughs were integrated with Glaxo.

SmithKline Consumer owns the ‘Horlicks’ brand and is the market leader in the malted food segment. It recently took over ‘Maltova’ and ‘Viva’ too. However, internationally, SmithKline is more of a pharma company with the major operations of ‘Horlicks’ concentrated in the UK, apart from a sizeable presence in India. Glaxo has already sold its foods portfolio (comprising ‘Farex’ and ‘Glucon D’) worldwide. Even in India the food division was sold to Heinz.

We have tried to hypothecate about the merger ratio between the two companies assuming of course that Burroughs Wellcome and SmithKline Consumer are kept out of the merger temporarily. If one were to make a forecast the full year earnings, Glaxo would end up reporting a net in the range of Rs 820 m, SmithKline would in all probability end up with a net in the range of of Rs 240 m.

Assuming a 1:2.5 ratio (i.e. 2.5 shares of SmithKline for every 1 share of Glaxo), the merged entity would end up with an equity of around Rs 716 m (post merger) and a per share earnings of Rs.14.80.

At a price earnings of around 35, the merged company could quote at levels of Rs 520–530. While Glaxo currently quotes at a price of Rs 479, SmithKline Pharma is quoting at the price of 208. The current market prices are actually indicative of a 1:2.3 ratio (i.e. one share of Glaxo for every 2.3 shares of SmithKline Pharma).

Equitymaster requests your view! Post a comment on "Glaxo, SmithKline merge ". Click here!


More Views on News

GSK PHARMA Announces Quarterly Results (1QFY21); Net Profit Down 2.2% (Quarterly Result Update)

Aug 26, 2020 | Updated on Aug 26, 2020

For the quarter ended June 2020, GSK PHARMA has posted a net profit of Rs 1 bn (down 2.2% YoY). Sales on the other hand came in at Rs 6 bn (down 17.7% YoY). Read on for a complete analysis of GSK PHARMA's quarterly results.

GSK PHARMA Announces Quarterly Results (2QFY20); Net Profit Up 398.9% (Quarterly Result Update)

Oct 25, 2019 | Updated on Oct 25, 2019

For the quarter ended September 2019, GSK PHARMA has posted a net profit of Rs 5 bn (up 398.9% YoY). Sales on the other hand came in at Rs 9 bn (up 8.1% YoY). Read on for a complete analysis of GSK PHARMA's quarterly results.

GSK PHARMA 2018-19 Annual Report Analysis (Annual Result Update)

Jun 24, 2019 | Updated on Jun 24, 2019

Here's an analysis of the annual report of GSK PHARMA for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of GSK PHARMA. Also includes updates on the valuation of GSK PHARMA.

More Views on News

Most Popular

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

I Recommended this Stock over Page Industries because it's Relevant to Doubling Your Income (Profit Hunter)

Sep 7, 2020

Things are not often what they seem in the market and how you can take advantage of this.

The NASDAQ Whale Could Harm Your Portfolio (Fast Profits Daily)

Sep 7, 2020

The discovery of Softbank pushing up prices on the NASDAQ will cause volatility in the market. Stay alert!

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms


Sep 18, 2020 (Close)


  • Track your investment in GSK PHARMA with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks