SmithKline and Glaxo merger plans collapse

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The Independent Online
PLANS for the largest ever corporate merger collapsed last night when Glaxo Wellcome and SmithKline Beecham revealed that talks between the companies had been terminated.

The full reasons for the apparently abrupt and bitter termination of negotiations over the creation of what would have been the world's third largest company were not immediately clear.

Glaxo spokeswoman Nancy Pekarek said the companies were unable to "achieve conclusions to the discussions" which began last month, shocking the City when they did so.

"When the talks were announced both the companies thought that the merger did present compelling strategic opportunities," she added. She refused to disclose exact reasons for the termination of the talks, details of which may remain confidential.

But in its announcement, SmithKline said the negotiations began falling apart on Friday after Glaxo sought to change the terms of a tentative deal. This had created "insurmountable differences" that left the two British drug makers unable to agree on the terms of a possible merger.

The company said discussions since Friday had revealed a number of differences between the companies, "including differences in the approach to the possible merger, management philosophy and corporate culture". And it added: "Most importantly, Glaxo's recent conduct of these discussions has inevitably strained relations between the two companies."

Last night, there was immediate speculation that the abandonment of the talks could lead to a fall of the company's share prices as sharp as the rise which occurred when merger talks were announced on 30 January. In New York, shares of Glaxo Wellcome Plc fell by nearly two and a half points in late after-hours trading following the announcement.

News of the talks' collapse was greeted with relief by one of the main unions representing pharmaceutical workers. The Manufacturing, Science and Finance Union said the termination of discussions was good for the 21,000 employees of both companies in the UK.

Roger Lyons, the union's general secretary, said: "Size is not everything, pluralism is best for this industrial sector and therefore I welcome the collapse of the potentially damaging project."

Many analysts had considered the merger a fait accompli because all major issues appeared resolved. The original plan decided senior management positions, gave Glaxo - which is the UK's largest pharmaceutical company with a stock market value of pounds 58bn - a majority 59.5 percent share and left the merged company in the United Kingdom.

It now seems that negotiators for Glaxo were no longer willing to go ahead on those terms.

Incompatible giants

Glaxo Wellcome was created in 1995 when Glaxo took over Wellcome in a pounds 9bn deal - the biggest in UK corporate history at the time.

Makes the world's biggest-selling drug, the anti-ulcer treatment Zantac, and the Aids treatments Retrovir and Epivir.

Employs 54,900 people world-wide, including 13,000 in the UK.

In its last full year (1996), made pre-tax profits of pounds 2.96bn on sales of pounds 8.34bn.

SmithKline Beecham was in talks with American Home Products Corporation until it broke off negotiations to announce the Glaxo deal.

Makes Panadol and Andrew's Liver Salts, as well as Macleans toothpastes, Lucozade and Nicorette anti-smoking patches.

Employs 57,000 people world-wide.

In its last full year (1996), it made a pre-tax profit of pounds 1.5bn on sales of pounds 7.9bn.