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Glaxo fraud probe weighs on flat FTSE
by Daniel Grote on May 28, 2014 at 11:12
GlaxoSmithKline (GSK) has weighed on the FTSE 100 after the Serious Fraud Office (SFO) announced it had launched an investigation into the pharmaceutical giant.
Glaxo was the biggest faller of the UK blue-chip index, shedding 28p, or 1.7%, to £16.06 on the news. In a short statement, the SFO said it had 'opened a criminal investigation into the commercial practices of GlaxoSmithKline and its subsidiaries'.
The UK's biggest pharmaceutical group said in response that it was 'committed to operating its business to the highest ethical standards and will continue to cooperate fully with the SFO.'
The SFO action comes after Chinese police earlier this month charged the former boss of Glaxo's China business and other colleagues with corruption, after claiming to have uncovered a scheme to bribe doctors and hospitals.
The drop in Glaxo shares held back the FTSE 100 from any gains. The index traded broadly flat, down three points at 6,842. Jonathan Sudaria, dealer at Capital Spreads, said European investors were taking stock after a day of healthy gains. 'Following the bank holiday markets took heed from a positive global outlook and a "concern-free" day of trading. The bears are lacking the headline breaking alarm bells to trigger a sell-off, and until that time markets will most likely drift higher as volatility (and thereofre risk) decreases.'
Weir Group (WEIR) was another faller, as the valve and pump manufacturer's revised €4.6 billion (£3.7 billion) bid for Finnish rival Metso was rejected. Weir fell 24p, or 0.9%, to £35.80 as it announced it was abandoning the takeover attempt. 'Weir believes it made a compelling proposal but remains financially disciplined and therefore does not intend to pursue this opportunity further at this time,' it said.
Analysts at Liberum said the deal could have led to a 19% earnings jump, but pointed to other potential takeover targets following the Metso disappointment. 'Weir does not intend to sweeten the deal but we believe the landscape for pumps and valves engineers, including names such as IMI (IMI) and Sulzer, remains ripe for consolidation,' it said.
London Stock Exchange Group (LSE) was the biggest riser, adding 45p, or 2.4%, to £19.52, after Credit Suisse analysts added it to their CS Focus list of top stock pics.
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