Bristol deal may be shipshape for GSK

THE market has jumped to the conclusion that Glaxo-SmithKline is gagging to do the wrong deal. That is perplexing. For a start, Glaxo isn't gagging to buy Bristol-Myers Squibb. What's more, it may not even be the wrong deal.

Glaxo realises as much as anybody else that BMS would not solve its main problems: that some important drugs such as the antibiotic Augmentin are losing their patent protection and there is a lack of new blockbuster drugs in the pipeline.

Bristol's pipeline is bare too. So buying the troubled US drugs group would not do much to drive forward revenue growth. Glaxo appreciates that its priority ought to be to fill its pipeline - whether with drugs developed in-house or by buying biotech companies-So why is Glaxo flirting-with Bristol? Because it would be irresponsible not to sniff over a stricken rival. There might, after all, be a bargain to be had. And even if one agrees that Glaxo's priority ought to be to stuff its pipeline, that does not mean it should forswear the opportunity for further cost-scrunching.

It may not be as uplifting as growing the top line, but it can be an effective way of driving the bottom line. And buying BMS would certainly deliver big cost cuts.

The market's reaction indicates a lack of trust in chief executive Jean-Pierre Garnier. Investors are worried that he will become a deal-junkie as a way of covering up failures in patent protection and new drug development.

There certainly has been a string of disappointments. But that snap judgment looks too harsh.

C&C's float hopes are a bit too stout

WILL the Irish ever tire of stout? Cantrell & Cochrane, the latest company to test Britain's comeback flotations market, is betting they will.

C&C is not attempting to wean the Irish off alcohol, though soft drinks and mineral water are a good part of its business. It is principally trying to get drinkers to trade their traditional tipple for cider - Bulmers, actually.

But isn't Bulmers the preferred drink of Britain's indigents? Not exactly - same name, different company. C&C owns the Bulmers brand name in Ireland and has made it a trendy, upmarket drink with young men. Over the past decade, Irish cider sales have grown 18% a year and C&C has an 89% market share. Combined with the wines and other spirits in its portfolio, C&C is the Anti-Stout.

With the float in Dublin and London, C&C - and private equity backers BC Partners - want to pay down debt and put the company in a position to expand abroad.

Chairman Tony O'Brien sees big opportunities in picking up 'unloved' brands that spirits giants such as Diageo are selling and revitalising them. C&C already has a portfolio of small brands in Italy and exports Irish whiskey brands like Tullamore Dew. It sees room to grow.

The tricky part will be squaring C&C's value with the expectations of its sellers, who are aiming for a market capitalisation of up to e1.4bn (£940m).

C&C's hodgepodge of tail spirits brands, cider, snack foods and water makes it more like Constellation Brands, owner of Matthew Clark ciders, than Diageo or Allied Domecq. On that basis, at 12 times estimated 2003 earnings - or a discount to Constellation's PE multiple of 13 - C&C looks palatable a price tag of no more than e1.22bn.

BT has eyes for Yell

TALK about cheek. British Telecommunications is on the verge of launching a rival to the Yell directories business it sold a year ago to leveraged buyout funds Apax Partners and Hicks Muse for £2.1bn. For Yell the timing is poor. It has put in motion an initial public offering expected to value the company at as much as £4bn.

While Yell's growth story is its expansion as an independent yellow pages business in the US, it still depends on Britain for the bulk of its revenues. That BT wants to do to Yell what Yell plans to do to US incumbents such as Qwest is certainly a plot twist.

But it is hard not to sense a whiff of revenge in BT's move. The telecoms giant offloaded Yell at fire-sale prices in its mad drive to reduce debt. BT looked silly when, a year down the road, it became apparent that Apax and Hicks might double their money. Touchè BT.