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GlaxoSmithKline PLC boss to quit in 2017 amid shake-up talk

Drug giant says Andrew Witty will go in March 2017
GlaxoSmithKline PLC boss to quit in 2017 amid shake-up talk
There has been market talk that Glaxo could either be taken over by a rival or broken up

--- Updates with broker comment and latest share price ---

Drug giant GlaxoSmithKline PLC (LON:GSK) has said its chief executive is stepping down, paving the way for a potential shake-up.

Glaxo said Andrew Witty would retire in at the end of March 2017, effectively confirming speculation late last month that the company had started looking for a successor.

The announcement is likely to be seen as a move by the company to placate those investors who have been calling for a break-up of Glaxo into its various parts.

There has been speculation that Glaxo could either be taken over by a rival or broken up, with its consumer healthcare division being a possible target.

Prominent fund manager Neil Woodford has demanded such a move, but Witty has responded that he believes the company is better staying intact.

Broker Killik & Co said: "This announcement signals the potential for a significant change in corporate strategy.

"An incoming chief executive, especially if an external hire, could push for a break-up of the company, or if results are disappointing, could place the dividend at risk."

Shares in Glaxo fell 1.84% to 1386 following the news.

GlaxoSmithKline is the ninth FTSE 100 company to be planning a change of chief executive in the next two years, according to AJ Bell investment director Russ Mould.

Whitbread (LON:WTB) has already installed Alison Brittain as chief executive, while M&S (LON:MKS), Bunzl (LON:BNZL), Admiral (LON:ADM), Babcock (LON:BAB), Wolseley (LON:WOS) and Rio Tinto (LON:RIO) will change theirs this year.

Glaxo and possibly BAE Systems (LON:BA.) are set to change their chief executives next year.

Mould said: "On the whole, a firm’s share price can welcome a new boss.

"On average, for the changes already seen, the company’s share price has increased by 16.4% to date.

"This compares to a FTSE 100 average decline of 3.6% - so outperformance of 20 percentage points."

In a statement confirming his plan to go next year, Witty said "very significant progress" last year had laid the foundations for Glaxo to achieve its medium-term outlook.

Witty said: “By next year, I will have been chief executive for nearly 10 years and I believe this will be the right time for a new leader to take over.

"In making this decision, it has been important to me that the board have the time to conduct a full and proper process and that we sustain the momentum of our current business performance."

Glaxo's chairman Philip Hampton said: "Andrew’s retirement next year will represent the culmination of 32 years of service and leadership to Glaxo and the industry.

"In the meantime, we will now start a formal process to appoint his successor, whilst also ensuring the Group remains focussed on execution of its strategy to drive growth and performance.”

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