Wall St raider declares war on GSK boss: Activist investor Elliott Advisors claims demands Emma Walmsley reapply for her own job
Elliott Management emerged from the shadows and declared war on Glaxosmithkline boss Emma Walmsley yesterday – with a demand that she reapply for her own job.
The Wall Street raider published a 17-page missive claiming the pharmaceutical giant lacked ‘credibility’ and scientific expertise in the boardroom.
The hedge fund demanded that GSK review its leadership ahead of the planned separation of the consumer healthcare business next year, with a committee left to decide whether Walmsley (pictured left) should remain in charge of the pharma firm afterwards.
Underfire: Activist investor Elliott Advisors, run by the feared Paul Singer, right, is demanding Glaxosmithkline boss Emma Walmsley, left, reapply for her own job
Elliott also questioned plans to list the consumer business on the stock market, saying the division should instead be sold outright if possible.
It blamed GSK’s lacklustre performance in the past decade on serial mismanagement and repeated strategy changes, claiming that with the right moves its shares could be worth 45 per cent more.
The intervention was the first time it has publicly discussed its investment in GSK and sets up a major clash with Walmsley and the British company’s board, which has backed her so far. Following the announcement, GSK’s shares rose 1.3 per cent, of 18.6p, to 1438p, valuing the firm at £72.4billion.
Elliott fell short of calling for Walmsley’s ousting directly but instead accused her of making ‘avoidable mistakes’, issuing ‘unclear communications’ and said her pitch to investors ‘was not sufficient to resolve credibility challenges’.
The letter added: ‘We have conviction that GSK’s future is much brighter than what its market valuation currently implies.
‘In order to bridge the gap between GSK’s fundamental prospects and the current lack of credibility, the board must take decisive action.’
It called on GSK’s board to take on more scientific experts and then launch a fresh search for ‘the best executive leadership for New GSK and consumer healthcare, considering both internal and external candidates’.
Elliott Management also argued against linking GSK’s pharmaceuticals and vaccine business more closely together, as has been called for by Walmsley, and said profits should be fattened by wringing out more cost savings.
How lack of scientists fuelled feud
Elliott has called for a dramatic shake-up of Glaxosmithkline’s board ahead of its demerger.
The hedge fund has questioned whether GSK can successfully split into separate pharma and consumer businesses given that the board lacks the relevant experience in both fields.
Elliott is particularly concerned by the small number of scientists on the board.
It said: ‘The first step is to add biopharmaceuticals and scientific experience to the GSK board.
‘This objective should be completed before the separation from consumer health in order to enable the board to choose the best possible leadership for New GSK.’
The board has 12 members, of which only five have direct experience in biopharmaceuticals including chief scientific officer Hal Baron and non-executive Laurie Glimcher.
Glaxo’s chairman Jonathan Symonds has spent most of his career in finance as has chief financial officer Iain Mackay.
Independent director Manvinder Banga spent 33 years as head of global foods at Unilever, while boss Emma Walmsley’s experience is also in consumer products having started her career at L’Oreal.
Two directors, Vivienne Cox and Lynn Elsenhans, have come from the oil and gas industry, while Urs Rohner was chief executive at German TV channel Prosiebensat.
Analysts said that Elliott’s criticisms needed addressing, adding that GSK’s pharma performance in recent years has been poor.
The hedge fund’s criticism of the chief executive echoed previous suggestions by some investors that she was not best-placed to lead GSK after it spins off the consumer division due to her lack of a scientific background.
Walmsley has said she is determined to stay on at the pharma-focused ‘New GSK’, stressing her credentials as a ‘business leader’ and reformer. GSK said Elliott’s observations were ‘not new’ and hit back, saying Walmsley’s plan was ‘designed to address all of these legacy issues, and more’.
‘We set out on June 23 an ambitious plan to deliver a step-change in performance and realise significant value for GSK shareholders over the next decade,’ a spokesman added.
‘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.’
So far Walmsley is thought to have the backing of top investors, but top-20 shareholder Aviva has raised doubts and said the ‘jury is out’ on her leadership.
However, in Elliott, she faces a formidable adversary.
The ruthless hedge fund is run by billionaire Paul Singer, 76, who was once branded ‘the vulture lord’ by former president of Argentina Cristina Fernandez de Kirchner after his firm pursued her country for unpaid debts.
Elliott even arranged for an Argentine naval ship crewed by 200 sailors to be detained in Ghana – and tried to seize the county’s presidential plane.
However yesterday some analysts raised doubts about its attack on GSK.
‘We think it remains an open question whether management change would deliver better immediate outcomes,’ Deutsche Bank told clients.
Pharma’s first lady in the crosshairs
By MARK SHAPLAND
The battle over Glaxosmithkline’s future has pitched one of the UK’s top female chief executives against a ruthless hedge fund tycoon and only one can emerge the winner.
GSK chief executive Emma Walmsley took over in 2017 and became the first woman in the world to run a major pharmaceutical company. She has become an icon for British business, renowned for her short blonde hair and fashionable glasses, and is often on the guest list for high-profile state occasions like when Donald Trump visited the UK as US president in 2019.
The daughter of Admiral Sir Robert Walmsley, she was picked out early on in her career as a potential chief executive.
One source who worked with her said: ‘It was clear she had leadership qualities. She was friendly but ruthless to those she thought weren’t up to it.’
But Walmsley appears to have met her match in Elliott boss Paul Singer, known for being aggressive, tenacious and extremely litigious. Elliott bought a stake in GSK in May this year – immediately triggering speculation over Walmsley’s future amid rumours he did not believe she was up to the job of splitting GSK into two separate companies.
Elliott is particularly unhappy that it has taken GSK nearly two years to plan the demerger – the uncertainty has caused the share price to slide – while the firm also questions whether Walmsley can lead the pharma business called New GSK instead of the consumer offshoot where her experience lies. Walmsley started her career at L’Oreal where she oversaw make-up and haircare products.
But many have questioned Elliott’s tactics and former Thyssenkrupp chief executive Ulrich Lehner in 2019 accused the firm of ‘psycho-terror’ by ‘placing lies in public’ and ‘harassing families and neighbours’ to force the resignation of senior executives.
The hedge fund, which has a stake in the company, said of the allegations that they were ‘categorically untrue and defamatory’, but Singer revels in his reputation.
The Admiral’s daughter clearly has some sleepless nights ahead.