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Transnational drugs companies, Glaxo and Wellcome merge Most significant news this month is the merging and “world wide integration” of the drug manufacturers, Glaxo Plc of the U.K. and the Wellcome Group, owned by Wellcome Plc of the U.K. Though originally founded in Aotearoa (in the Manawatu), Glaxo became a U.K. controlled transnational (see July 1992 decisions) and the biggest drug group in Europe. Its takeover of Wellcome created the world’s biggest drug company with subsidiaries in Aotearoa including Glaxo New Zealand Ltd, Glaxo Pharmaceuticals, Transact Computing Ltd, Allen and Hanburys (NZ) Ltd, The Glaxo Foundation for Medical Education Ltd, and Origen Pharmaceuticals Ltd. The price paid for the New Zealand business was initially suppressed but was released on appeal in October 1996: $25,000,000. One of Glaxo’s most significant operations here was the manufacturing and technical centre, Glaxo Laboratories, in Palmerston North. Only two months after the OIC approval, Glaxo announced its closure with the loss of 120 jobs by the end of the year. Only its Auckland based marketing, sales and distribution operation would be left in Aotearoa. Glaxo gave as its reason an argument it had been having with Pharmac, the government’s drug buying agency, but that was more likely playing politics. It is stretching credulity not to attribute the decision to move the operation overseas to the takeover of Wellcome. Analysts noted when the takeover was being debated at the international level, that heavy job losses were likely to follow. “One of the disappointing features of the Glaxo bid is that it focuses so heavily on job losses,” the head of Wellcome, John Robb, said. Analysts predicted 10,000 to 15,000 of the combined workforce of 65,000 could lose their jobs, with the greatest losses being in research and development laboratories (Press, “Trust sells out to Glaxo”, 30/1/95, p.36; “Drug manufacturer to close plant”, 2/8/95, p.1). The dispute with Pharmac was a classic case of the big pharmaceutical manufacturers trying to protect their profits against the use of cheaper “generics”: alternative brand drugs that do the same as the more expensive brand-name ones. Pharmac has an “interchangeable medicines list” containing around 300 alternative brand medicines the Ministry of Health has endorsed. In October last year, Pharmac general manager, David Moore warned that tens of millions of dollars could be saved, but that “groups with vested interests” could threaten the existence of the list. In unusually strong language for a government agency, he said that
In contrast, the Independent Pharmaceutical Manufacturers’ Association (IPMA) stated that “in Britain generics held 43% of the market share. This compared with 8% in New Zealand.” However the RMI campaign to sow doubt in doctors’ minds appeared to be working: the chairman of the Medical Association said that
The independents are under attack in the wake of the GATT settlement in any case. Changes in patent laws forced by the new agreement will make it even more difficult for generics to be produced. The New Zealand government has given away its ability to authorise competitive manufacturing where a patent-holder is charging too high prices or refusing to supply. Glaxo was in the vanguard of those big companies obstructing the cost-saving challenge to their monopoly positions. In February 1995, it obtained a hearing in the High Court to set a date for a judicial review of the list. It was challenging a competitor to its asthma drug Becloforte: Atomide Forte, made by Douglas Pharmaceutical. The grounds of the challenge were that it was not equivalent – though it was in fact the same price. Glaxo gets $17 million a year from its inhaled asthma drugs alone; generics in the same category return only about $1 million to their suppliers (Press, “Government’s generic medicines list facing legal challenge from drug company”, 21/2/95, p.6). The RMI and the IPMA joined forces later in the year (July) to threaten Pharmac with legal action if it didn’t allow certain expensive drugs onto the subsidised list. The Associate Minister of Health, Maurice Williamson, defended Pharmac’s practice saying “there is no way public money should be spent to buy or subsidise drugs which offer no effective improvement over existing medicines or which are slightly more effective but where there are others as good which are lower in price.” (Press, “Minister backs Pharmac in row with drug firms”, 22/7/95, p.3; “Drug firms file suit against Govt agency:, 27/7/95, p.5.) The merger between Glaxo and Wellcome came after several months of board-room tussles. Initially the 39.5% owner of Wellcome, the Wellcome Trust, refused to sell out to Glaxo. In March it conceded defeat, after trying to find other buyers. Glaxo’s star product is Zantac, an anti-ulcerant drug which is the largest selling drug in the world with annual sales of $US3.8 billion, making 43% of Glaxo’s profits. Wellcome’s biggest is Zovirax, which is used in the treatment of genital herpes, shingles and cold sores, the world’s fourth largest selling drug at $US1.2 billion and 51% of Wellcome’s profits (Press, “Trust sells out to Glaxo”, 30/1/95, p.36). Xylem buys shares in Fletchers, making it over 44% overseas owned Fletcher Challenge is now officially an overseas company, with “ultimate majority overseas ownership” in the U.S.A. according to the OIC. This emerges from the issue of 54,385,000 Forest Division shares to Xylem Fund ILP of the U.S.A. for $112,576,950. However, the OIC also says that “the share issue results in 44.9% of Fletcher’s shares being held by a diverse group of overseas persons.” And in any case in 1988 it granted Fletchers an exemption to OIC requirements because it considered that the company was clearly in “New Zealand hands”. Note however that according to Alan Williams in the Press (“Fletcher overseas owners push for minority veto rule”, 28/9/95, p.36) “overseas institutions own 53% of the Fletcher Challenge ordinary Division shares and 57% of the forest Division shares.”
Xylem is also a significant owner of shares in CBS Forests Ltd: 65.03% is owned by Xylem and the Public Employees Retirement System of Ohio, through the company XII/Ohio Pers Timber Equity Fund (see analysis of December 1994 OIC decisions). Chelsea, CSR subsidiary, buys remaining 49% of Monier Brickmakers Chelsea Investments Ltd, a subsidiary of CSR Ltd of Australia has approval to buy the 49% of the non voting capital in Monier Brickmakers Ltd that CSR does not already own. CSR Ltd currently owns 100% of the voting capital and 51% of the non voting capital. The 49% of non voting capital is currently owned by Redland International Ltd of the U.K. The price is A$4,000,000. CSR owns the Chelsea Sugar Refinery in Auckland which, until last year when competition from Mackay Refined Sugars of Australia threatened, had a virtual monopoly on sugar supply in Aotearoa (80% to 85% of the market: Press, “Trans-Tasman sugar invasion threatens Chelsea Refinery”, 13/7/94, p.29, and August 1992 OIC decisions); but it is also a major conglomerate with interests in building materials, coal, mining, oil and gas, and aluminium production. The Australian Trade Practices Commission is reportedly set to fine CSR, along with Boral and Pioneer International, for price fixing in the Queensland concrete market (Press, “Australian price fixing alleged”, 8/8/95, p.35). Energy Corporation of U.S.A. petroleum prospecting in South Wanganui The Energy Corporation of New Zealand Ltd, a subsidiary of the Energy Corporation of America (U.S.A.) has approval to undertake petroleum prospecting and exploitation. It “is to take a total assignment of a 89% interest in a petroleum prospecting licence in the South Wanganui basin which may involve the use of rural land. The other 11% interest is held by the Government. Energy Corporation’s parent company is a diversified natural gas and oil company in the United States of America.” In July however, Southpower, the Christchurch local body owned electricity and gas retailer which also owns 69% of Enerco, the North Island gas retailer, announced that Enerco was entering a joint venture with Energy Corporation. Each with 44.5%, they would jointly explore licence area PPL 38708 in the South Wanganui Basin, which extends from under the Tasman across Wanganui and the Manawatu. Enerco would pay $2 million for its half-share and then $2.5 million would be spent on sinking an onshore well, beginning before December. Energy Corporation, based in Denver, bought the licence from another American explorer and sought a local partner after assessing the area (Press, “Enerco returns to gas exploration”, 29/7/95, p.23). In August the government announced that 26 applications had been received for 26 petroleum exploration permit blocks covering about 34,000 sq km in the Taranaki, Canterbury, and Westland basins. According to the Minister of Energy, Doug Kidd, this would likely more than double the number of permit areas being explored in New Zealand. “Most of New Zealand’s sedimentary basins are now available for exploration under the Acceptable Frontier Offer provisions”, he said. Another 14 large blocks off the east coast of the North Island had also been offered (Press, “Fresh interest in NZ petroleum exploration areas”, 5/8/95, p.34). Malaysian company sets up subsidiary to restore old BNZ site in Wellington A “company yet to be incorporated” which will be a wholly owned subsidiary of Ipoh Ltd of Australia, which in turn is owned “approximately 40%” by IGB Corporation Berhad of Malaysia is being set up for “in excess of $16 million” in order to “conserve, restore, and earthquake strengthen the ‘Old BNZ Site’ in Wellington” under an agreement with the Wellington City Council. “The building, which is designated as a heritage building, will be developed into a shopping centre and commercial offices. Ipoh has undertaken a number of restoration and redevelopment projects in Australia.” Surelight of Hong Kong to buy two ha. in Symonds St, Auckland for $12.6m Surelight Holdings Ltd of Hong Kong has approval to acquire “approximately two hectares of land in central Auckland known as the Symonds Street site” for $12,600,000 from the Auckland City Council. It may work through nominee companies Glenside Investments Ltd or Symonds Street Developments Ltd. Surelight is owned by “Messrs Chan, Li, Wong and Chan“ of Hong Kong. Surelight “propose to develop the property into a residential/retail/commercial complex.” This decision was originally completely suppressed and was released on appeal only in August 1997. Tiong subsidiary buys 151 hectares in Manawatu from Crown for $40,000 An interesting rural land sale sees Manuka Holdings Ltd, a subsidiary of the Malaysian Tiong family company, Ernslaw One Ltd, acquiring the freehold of 151 hectares of land in the Manawatu from the Crown for $39,787.
This continues a pattern: in November 1994 we reported:
Macraes Mining buys 764 hectares more land at Macraes Flat, Otago Macraes Mining Company Ltd, which is “approximately 39%” owned by Union Gold Mining NL of Australia, has gained approval to acquire 764 hectares of land at Macraes Flat, Otago for $1,500,000 to enable it “to continue and expand its mining activities”. It will sub-lease back to the vendors the farm land which is not being mined. This decision was originally almost completely suppressed, and released only after appeal in October 1996. Macraes Mining has a record for demanding the suppression of OIC decisions concerning it.
CS First Boston sets up six subsidiaries CS First Boston Inc of the U.S.A. is setting up six 25% owned companies in Aotearoa as “part of a global restructuring”. The companies will be owned “75% less one share by New Zealand Management” but “will continue to have a strong business affiliation with” the U.S. parent. With all the imagination a merchant banker can muster, the companies are named CS First Boston NZ Investments Ltd, CS First Boston NZ Holdings Ltd, CS First Boston NZ Securities Ltd, CS First Boston NZ Futures Ltd, CS First Boston NZ Ltd, and CS First Boston NZ Services Ltd. Tranz Rail transfers operational assets to subsidiary Tranz Rail Ltd of the U.S.A., owner of New Zealand Rail Ltd is transferring “certain operational assets” to a newly formed subsidiary, Tranz Rail Finance Ltd for an amount identified only as “in excess of $10 million”. Fulton Hogan amalgamates subsidiaries Fulton Hogan Holdings Ltd (formerly Fulton Hogan Ltd), principally engaged in transport services, but including road construction, quarrying and other activities, and 36.94% owned by Shell New Zealand Holding Company Ltd, is amalgamating all its subsidiaries: Fulton Hogan Canterbury Ltd |
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