1st Jul 2021 12:11
(Alliance News) - Elliott Management Corp on Thursday confirmed it has built a stake in GlaxoSmithKline PLC and called for the "right leadership" to realise its value after years of underperformance.
The activist investor said in an open letter that it has built a "significant position" in GSK without specifying the size. The Financial Times first reported in April that Elliott built a multi-billion-pound stake in GSK.
According to rules of the London Stock Exchange and the UK Panel of Takeover & Mergers, investors who acquire a stake above 3% must disclose this to the LSE and the company.
The planned separation of GSK's consumer health division from pharmaceuticals could increase its share price by up to 45%, according to Elliott's analysis, and "much more in the years beyond".
Shares in GSK were up 0.8% to 1,430.60 pence in London on Thursday morning. However, the stock is down 13% over the past 12 months.
In the letter, Elliott said it supported GSK's decision to spin off consumer health. But the company must be careful in choosing the right leadership for each business after years of underperformance, Elliott added, putting pressure on Chief Executive Emma Walmsley.
"Despite the strengths of its people, its vaccines and its drugs, GSK has a poor record of execution and value creation. These shortcomings are clearly demonstrated in GSK’s share price, which has underperformed every single peer over nearly every conceivable timeframe," Elliott said.
The sale of the oncology business to Novartis AG in 2015, before re-entering the market with the USD5 billion acquisition of Tesaro in 2018, was pointed out as an example of GSK's lack of strategic direction.
The letter called for GSK to add pharmaceutical experts to the board before the separation, to select the best executives from internal and external candidates.
"Elliott strongly believes that the future CEOs [of each business] must have the skillsets and expertise to match their respective tasks at hand," the letter said.
While Elliott didn't name Walmsley, the letter suggests it opposes her continuing as chief executive of the pharmaceutical business.
Walmsley has been head of GSK since 2017 and has a background in consumer business after 17 years at L'Oreal SA. She was promoted to the top post at GSK from chief executive of its Consumer Healthcare business.
"The board has a responsibility to seize this opportunity for future patients, current investors and all other stakeholders...We stand ready to help GSK along the way," Elliott said.
In response, a GSK spokesperson said: "The legacy issues that Elliott identifies in its letter are not new. They have all been identified by GSK since 2017. The transformation programme has been designed to address all of these legacy issues, and more.
"We set out on 23 June an ambitious plan to deliver a step-change in performance and realise significant value for GSK shareholders over the next decade. We believe our shareholders are supportive of this strategy, and that they are focused on GSK executing on it without distraction or delay. This is our clear priority.
"We will respond to Elliott’s letter more fully in due course."
By Ivan Edwards; [email protected]
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