Analysts have weighed in on the prospect of a break-up of GlaxoSmithKline (LON:GSK), with Citi suggesting that the group’s chairman is seeking to ‘buy time’ and support the share price, The Times reports. The comments came after a report in the Financial Times suggested that the group was considering a break-up amid investor pressure to spin off is consumer business.
GSK’s share price rose in the previous session, adding 0.95 percent to close at 1,564.60p. The stock outperformed the broader UK market, with the benchmark FTSE 100 index ending the session in negative territory.
Chairman seeking to ‘buy time’
The Times quoted Citi as commenting that speculation over a split of the FTSE 100 drugmaker was “an attempt by the chairman to buy time and support the recently rebounded GSK share price”. The FT reported on Friday that the group’s chairman Philip Hampton had been in discussions with the company’s biggest shareholders about creating a standalone pharma and vaccines company in the medium term.
A break-up of the British drugmaker had previously been advised by top investor Neil Woodford, who was arguing that the business should be divided into separate companies, rather than run as a single £65-billion giant.
UBS flags caution over dividend
The Times also quoted analysts at UBS as commenting in response to the FT report that while a break-up seemed to make sense on paper, they cautioned “that the dividend cover as well as the current repositioning of GSK would not allow for this for a few years to come”.
The reports for a possible break-up come ahead of the FTSE 100 drugmaker’s results tomorrow when the company is also expected to outline plans in a strategy update this week to focus on developing blockbuster oncology treatments.