Glaxo and SmithKline Beecham face drugs sell-off to seal pounds 100bn mega-merger

Glaxo Wellcome and SmithKline Beecham are expected to sell some of their best-selling drugs in order to avoid a full-scale regulatory inquiry into their proposed pounds 100bn mega-merger. Meanwhile unions are asking the Government to block the deal, which they fear could lead to the loss of 10,000 jobs in the UK. Nigel Cope, City Correspondent, reports.

Disposals are likely in two areas of therapeutic drugs where Glaxo and SmithKline dominate their markets. In anti-viral drugs, used to treat infections such as Herpes, Glaxo markets the highly successful Zovirax and Valtrex while SmithKline has Famvir.

In drugs used to combat nausea caused from chemotherapy, Glaxo and SmithKline dominate the market with Zofran and Kytril respectively. The two companies expect they will have to make disposals in these areas in order to satisfy the competition authorities that consumer choice would be protected and that a position of market dominance would not be used to raise prices.

There is a parallel with the Glaxo takeover of Wellcome in 1995, when both companies had migraine treatments in late stages of development. Glaxo sold its drug to Zeneca.

The deal will be scrutinised by the Federal Trade Commission in the US and the European Commission in the European Union. However, it is possible that the UK competition authorities could seek to gain a role in the inquiry process.

Though a merged Glaxo-Wellcome and SmithKline Beecham would be a UK company with its base in London, unions have reacted angrily to the prospect of widescale redundancies here. They fear up to 10,000 job cuts as part of a pounds 1bn cost-cutting programme and say it will reduce the country's pool of skilled scientists, hit competition and reduce consumer choice. Roger Lyons, the general secretary of the MSF, the manufacturing, science and finance union, said: "Our concern is that the only advantage of the deal is in cutting costs by shedding jobs." The union is calling for urgent meetings with Margaret Beckett, President of the Board of Trade, as well as MEPs and both companies.

The biggest threat to jobs is at the two groups' head offices and sales and marketing centres. Glaxo's head office is in Greenford while SmithKline employs almost 2,000 people in head office and sales functions at several offices in Brentford.

It is not clear whether the group's main research and development centres could be threatened. Glaxo opened a pounds 700m facility in Stevenage in 1995. SmithKline spent pounds 250m on a new site in Harlow, Essex, which opened last April.

Neither company would comment on possible research closures though SmithKline said: "The driving force behind this merger is that it would build a R&D function that would be second to none."

The combined research spending of the merged group would be pounds 2bn. SmithKline claims this would be double the spending of any other drugs company. Analysts estimate that the UK job loss figure could be closer to 2,000, mostly from head office and sales functions.

They were responding to the surprise announcement late on Friday that the two companies were in detailed discussions which could lead to a full scale merger. The deal would be the largest merger in corporate history and create the third-largest company in the world after General Electric of the US and Royal Dutch-Shell, the Anglo-Dutch Group. It will also be the world's largest pharmaceuticals company, leapfrogging Merck of the US.

The proposals also mean that SmithKline has dropped its plans to merger with American Home Products in a pounds 77bn deal that was only announced last week.

The terms of the deal have already been decided even though the two groups first made contact only eight days ago. Glaxo shareholders will hold 59.5 per cent of the group with SmithKline investors holding the remaining 40.5 per cent. Sir Richard Sykes, Glaxo's chairman, will be executive chairman of the combined group. Jan Leschly, chief executive of SmithKline, will be chief executive.

The merger will provide a fees bonanza for the investment banks. Lazards, which is advising Glaxo, and Morgan Stanley, which is representing SmithKline, could net fees of pounds 100m, according to some estimates.

Analysts say the merger is likely to prompt another wave off consolidation in the pharmaceuticals industry. Drug company shares are expected to soar today as traders try to spot the next bid or merger target.

Zeneca yesterday dismissed suggestions that it would be forced to seek alliances in order to combat the Glaxo-SmithKline behemoth. "The company has been very successful in developing a drug portfolio in the past few years and there is no reason why that should not continue," a spokesman said.

Zeneca has concentrated on two areas, cardio-vascular drugs and cancer treatments.

Hoechst, the German drugs group said the Glaxo merger would intensify international competition. "If the industry concentration process continues, then all industry participants will have to re-think their positioning," it said.

News
peopleFrankie Boyle responds to referendum result in characteristically offensive style
News
news
Life and Style
Couples have been having sex less in 2014, according to a new survey
life
New Articles
i100... with this review
PROMOTED VIDEO
Voices
Holly's review of Peterborough's Pizza Express quickly went viral on social media
Sport
footballTim Sherwood: This might be th match to wake up Manchester City
Arts and Entertainment
musicHow female vocalists are now writing their own hits
New Articles
i100
News
ebooksAn unforgettable anthology of contemporary reportage
News
news
Arts and Entertainment
musicBiographer Hunter Davies has collected nearly a hundred original manuscripts
News
Blahnik says: 'I think I understand the English more than they do themselves'
people
Arts and Entertainment
Michelle Dockery as Lady Mary Crawley in Downton Abbey
TVInside Downton Abbey series 5
Life and Style
The term 'normcore' was given the oxygen of publicity by New York magazine during the autumn/winter shows in Paris in February
fashionWhen is a trend a non-trend? When it's Normcore, since you ask
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam