After weeks of untutored intimidation, Elliott Advisors has done its worst by firing off a 17-page letter to GlaxoSmithKline with a laundry list of demands.
Its most outrageous request is that chief executive Emma Walmsley, currently engaged in a complex split of the £72billion pharma, vaccines and consumer healthcare group, should re-apply for her job if she wants to stay in charge of life sciences.
Time, then, too for camera-shy Gordon Singer, who heads Elliott’s London operation, to do the same and ask permission to hang on to his job as chief European pot stirrer.
Demands: Activist investor Elliott Advisers is calling for Glaxosmithkline’s chief exec Emma Walmsley (pictured) to re-apply for her job
It would be a scene straight out of the brilliant HBO-Sky series Succession in which a gnarled patriarch (in this case Paul Singer) fears handing over control of his enterprise to any of his offspring.
The behaviour of activist investors is intrinsically wrong. No one should be under any illusion about motives.
The interests of Elliott at GSK, Cevian Capital at Aviva and until recently Ed Bramson’s Sherborne at Barclays is to invest, make a noise and hope that their disruptive tactics jog the share price.
That allows them to top up their personal fortunes, and those of their backers. They do not have an ounce of interest in all the other parties involved in corporate life.
Firms are made up of colleagues, suppliers, customers and in GSK’s case the scientists and intellectual property which is at the heart of all that it is does.
Environment, social and governance (ESG) is way off the core agenda of activists.
The decisions by Elliott and Cevian respectively to pick fights with respected female chief executives in the middle of transformation plans does not speak well of their understanding of efforts for more gender diversity in the FTSE 100.
Also disagreeable is how these marauding shareholders accumulate their power.
They don’t simply invest through brokers and make the necessary declarations required by the London Stock Exchange and regulators.
Stakes are built, surreptitiously cloaked in nominee names and often the purchases are not actual shares, but derivative products bought with leverage.
The public needs to see that the big battalion investment institutions, custodians of our pensions and savings, are willing to stand up for the ESG principles they espouse.
Royal London has reinforced the benefits of being a mutual by supporting Walmsley’s plan for a new GSK. M&G is doing the same.
Schroders and Jupiter are broadly thought to be of the same opinion. Only Aviva’s former investment chief David Cumming posed question marks about Walmsley’s leadership. That partly explains why he is now tending his garden.
Elliott’s assault drove GSK and its advisers to provide more clarity on the future. Chairman John Symonds made clear from the onset that Elliott’s demands for regime change are non-negotiable.
Even though the share price has lagged behind its pharma comparators, Walmsley’s leadership during, and ‘in the years’ after separation, is a given.
The proposal by GSK to split out 80 per cent of its holding in the consumer healthcare company was not made lightly.
It is designed to be tax advantageous to existing investors. Possible in the interim, while the market awaits the splits, a trade buyer could intervene.
The most likely candidates are US firms Proctor & Gamble and Johnson & Johnson. They would have to find an answer to the tax problem and J&J could encounter antitrust issues. Potential UK buyers might be Unilever or Reckitt.
It would be a big bite and probably involve using paper, which might not appeal to existing shareholders.
There may be questions about Reckitt’s ability to manage any transforming takeover given the Mead Johnson baby formula debacle. Private equity might find it a too big a pill to swallow.
Elliott wants GSK to sharpen up revenue growth targets. So do all of us who are GSK shareholders. If it delivers the 10 per cent rise in operating profits each year through to 2026 that will be more than enough.
As for the idea that vaccines and pharma should be kept separate (a suggestion first made by disgraced investor Neil Woodford) it shows no understanding of the industry.
Covid-19 demonstrated the lines between vaccines and palliative treatments are blurring. The science of immunology is a common factor.
Moreover, treatments for diseases such as HIV increasingly will be administered using jab technology.
Gordon Singer should concentrate on polishing his tarnished CV.
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