SKB outbids rivals in dollars 3bn Sterling coup: Latest acquisition in industry scramble will create world's largest supplier of over-the-counter medicines

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The Independent Online
SMITHKLINE Beecham jumped back into the global scramble for healthcare assets yesterday, outbidding a host of suitors for Kodak's Sterling Winthrop non-prescription drugs business with a cash offer of USdollars 2.925bn.

The deal will make SKB the world's largest supplier of over-the- counter medicines - the faster- growing part of the pharmaceuticals industry - creating a global business with combined 1993 sales of dollars 2bn. It also comes hard on the heels of SKB's entry in the managed-care business in the US with the dollars 2.3bn purchase in May of Diversified Pharmaceutical Services.

SKB faced fierce competition from powerful contenders such as Procter & Gamble and Germany's Bayer SA. Bayer had hoped to regain North American rights to a best-selling aspirin by that name. Bayer said it would approach SKB about buying the rights.

Analysts in New York welcomed the deal, which they saw as an important catch for Jan Leschly, recently appointed SKB's chief executive. Shares of SKB and Kodak rose sharply in New York on the news, with SKB gaining 3 8 to 35 and Kodak 11 4 to 585 8 .

Only a month ago, analysts thought Sterling's OTC business, with sales of about dollars 1bn a year, would sell for dollars 2bn to dollars 2.5bn.

SKB said it planned significantly to reduce the debt gearing resulting from the deals by 'the disposal of non-strategic businesses'. However, analysts doubt it will part with the Bayer line, which fills a big hole in its US product range. Instead it may consider the animal health division.

Among the other important brands SKB acquires are the painkiller Panadol and Neo-Synephrine decongestants. It also takes control of Phillips Milk of Magnesia, a big competitor to its Tums tablets, and the OTC version of Tagamet in gastro-intestinal products, and of Stri-Dex and Hinds, which compete with its Oxy skincare products.

The acquisition puts SKB ahead of both the traditional consumer healthcare leaders, Johnson & Johnson and American Home Products, which last week acquired American Cyanamid in a USdollars 9.7bn deal. SKB had been in talks with Cyanamid about swapping its vaccine and animal health businesses for Cyanamid's prescription drug and consumer- brand businesses.

The business SKB bought yesterday is part of Sterling Drugs, which Kodak bought for dollars 5.1bn in 1988 as part of an ill-fated diversification drive. Kodak won Sterling Drugs after a protracted bidding battle with Roche Holdings. The business included a prescription drugs business and the Lehn & Fink line of household disinfectants and do-it- yourself household products.

Saddled with more than dollars 7bn of debt, Kodak decided last year to start divesting non-core businesses, selling off its Eastman Chemical division last summer. In May, the chief executive, George Fisher, announced a sweeping 'refocus' of the company on its main 'imaging' business, unveiling an auction process designed to recoup the money spent in its diversification drive.

Kodak sold Sterling's prescription pharmaceuticals business soon afterwards to its former European over-the-counter partner, the Sanofi division of France's ELF, for dollars 1.675bn, and its 50 per cent share in the OTC business.

(Photograph and graph omitted)

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