Analysts said Bayer had paid a high price to win back the rights to its name and trademark in the US, confiscated in the First World War, but that the deal was good for SmithKline, easing worries that it had taken on too much debt for its expansion.
'SmithKline was mainly interested in Sterling's non-US businesses, so selling off the North American side has proved astute,' Steve Putnam, of Kleinwort Benson, said. SmithKline bought the Sterling Winthrop OTC business from Kodak in a dollars 2.9bn deal two weeks ago.
John Reeve, at Daiwa, said: 'SmithKline has recovered a third of its purchase price while it has given away a quarter of the profit of the original Sterling business.'
Smithkline's shares closed 4p higher at 4251 2 p.
While SmithKline has kept the international rights to Panadol, the world's most widely available non-aspirin analgesic, it has sold back to the German company the rights to Bayer aspirin in the US. By purchasing Sterling and then selling parts of its operations on to Bayer - which will still have only dollars 600m in North American sales after the deal - SmithKline is seen as having kept these businesses out of the hands of domestic competitors such as Procter & Gamble.
Sterling Winthrop reported worldwide sales in 1993 of more than dollars 1bn, with profits of dollars 162m. The business being sold to Bayer had sales in 1993 of dollars 366m and profits of dollars 43m. Analysts expect SmithKline to make further disposals of non-core businesses if it is to achieve its goal of reducing gearing to 100 per cent by the end of 1995.
Manfred Schneider, chief executive of Bayer, described the deal to buy back the US rights lost 75 years ago as 'a special event in the history of our firm'.
The German company's North American subsidiaries will be renamed Bayer as soon as possible.
Bayer lost the US rights to its name and cross-shaped trademark during the war when its businesses were confiscated as enemy assets and later auctioned to Sterling.