GlaxoSmithKline may be contemplating withdrawing from the Chinese market following its recent woes there, according to the BBC’s business editor Robert Peston.
The drugs major has been hit by scandal over the last few months due to reported tax irregularities and allegations of bribes paid through travel agencies to doctors in China. GSK had put the blame at the door of senior executives who the company said had acted outside its processes and controls but earlier this week, the state-owned Xinhua news agency claimed the fault lies with GSK China “rather than drug salespeople's individual behaviour".
In an article on the BBC’s website, Mr Peston notes that the firm’s sales of pharmaceuticals and vaccines in China, which reached £750 million last year, have been badly affected and “I am told that GSK will soon have to evaluate whether the infrastructure of generating sales in China is affordable, if there is no assurance of a return to business as usual”.
He writes that GSK accepts that individuals may have behaved inappropriately but it “continues to deny corporate involvement in the alleged wrongdoing”. Mr Peston goes on to say that “what it will not and cannot do, I am told, is accept corporate liability for the alleged bribery, as the price of reaching a settlement with the Chinese authorities and resuming normal trading there”.
To do so would run the risk of having to pay “enormous fines in the USA and the UK, both of which have strict anti-bribery laws”, he concludes, “so the cost for GSK of refusing to plead guilty, as a company, may be a withdrawal from what many would see as the most important market in the world”.
Rumours Suntory will buy Lucozade and Ribena
Meantime, it has been reported that Japan's Suntory Beverage and Food is in advanced talks to buy GSK's Lucozade and Ribena brands for over £1 billion.
GSK carried out a strategic review at the beginning of the year and in April announced plans to sell them. At the time, chief executive Sir Andrew Witty said that “the tremendous growth potential of these iconic brands, particularly outside the core western markets, could be better leveraged by companies with existing category presence and infrastructure in these regions"..
Now a number of news organisations, citing unnamed sources, claim that a deal with Suntory is imminent. It had been suggested that an auction involving drinks companies and private equity firms would take place but it appears Suntory, which bought Orangina Schweppes and the Frucor Group in 2009, appears to have won the day.
Lucozade and Ribena bring in around £500 million a year and analysts have suggested that the winning bid could come close to the £1.5 billion mark.