SmithKline, Beecham Agree To Merger
PHILADELPHIA (AP) _ The directors of SmithKline Beckman Corp. and London-based Beecham Group PLC agreed Tuesday to merge into one of the world’s largest drug and health- care-products companies, according to a published report.
A formal announcement of the deal is expected Wednesday morning, The Philadelphia Inquirer reported in Wednesday editions, quoting unidentified sources familiar with the negotiations.
SmithKline spokesman Bob Holland would not comment on the report early Wednesday morning.
Directors of SmithKline agreed to the merger Tuesday night, after Beecham’s directors had approved it earlier in the day, the newspaper said.
The merger is subject to approval by shareholders and government regulators.
Beecham and SmithKline have been discussing a merger for months, but did not disclose the talks publicly until April 2. In a joint statement then, the companies said that if they agreed on a merger, the new company would be governed by directors drawn equally from the boards of SmithKline and Beecham and would be run by managers from both firms.
The agreement stipulates that Philadelphia-based SmithKline would oversee three of the new company’s five operating businesses: pharmaceuticals, clinical laboratories and animal-health care, said a source quoted by the Inquirer on condition of anonymity.
The pharmaceutical business would be the new company’s largest operation. It would be run by John F. Chappell, president of SmithKline’s drug division, Smith, Kline & French Laboratories.
Beecham would run the new company’s two other operations: over-the-counter medications and personal-care products.
The combined company’s chief executive officer would be Robert P. Bauman, an American who is Beecham’s executive chairman. SmithKline’s chairman and chief executive officer, Henry Wendt, will be an ″active″ chairman of the board of the merged company, the newspaper reported.
Wendt, 55, has been SmithKline’s chief executive officer since 1982 and its chairman since 1987.
Sources estimated annual revenues of the new business at slightly less than $7 billion. SmithKline reported total sales last year of $4.75 billion, while Beecham’s sales exceed $4 billion a year.
The merger agreement calls for SmithKline to spin off its eye- and skin- care business, Allergan Inc., and its 84 percent interest in Beckman Instruments Co. by distributing the shares to stockholders. SmithKline last fall sold to the public 16 percent of the common stock of Beckman.
Beecham also will divest itself of several businesses not related to drugs, including cosmetics and fragrances, a source said.
A source said SmithKline and Beecham stockholders would receive shares in the new combined company in a distribution that would not result in a taxable gain for shareholders.
SmithKline’s stock dropped 37 1/2 cents a share Tuesday in trading on the New York Stock Exchange, closing at $64.75. The stock traded as high as $68.50 last week.
Beecham stock, traded in the United States as American depositary receipts, rose 25 cents to $20.37 1/2 a share Tuesday.
The merger would strengthen Beecham’s reputation and distribution in Japan and the United States - two vital markets where SmithKline is strong. SmithKline would gain from Beecham’s expertise in marketing over-the-counter drugs and from several promising prescription drugs in Beecham’s research-and- development pipeline.