Glaxo Wellcome PLC and SmithKline Beecham PLC said yesterday that they were again in merger talks aimed at creating the world's largest pharmaceutical manufacturer.
In a one-sentence announcement, the two British companies said they were in "discussions which may or may not lead to a merger of equals of the two companies." Neither company would comment beyond the statement.
The approximately $82 billion deal would allow the two rival drugmakers to cut costs and pool their research budgets in a $300 billion industry that has seen a spate of recent merger moves.
Sources familiar with the talks said a deal could be reached early next week, possibly Monday. The two companies tentatively agreed to merge two years ago, but that deal fell apart in a dispute over who would run the combined company. That problem has apparently now been solved with the announcement by SmithKline's chief executive, Jan Leschly, that he would step down in April.
With Leschly gone, it would clear the way for Glaxo Chairman Richard Sykes to head the merged corporation. Sykes has indicated that he may step down in 2002 when he turns 60. That in turn would clear the way for SmithKline's Jeanne-Pierre Garnier to become chairman.
The Glaxo-SmithKline talks came in the same week that Warner-Lambert Co. said it was willing to negotiate with Pfizer Inc., which has made a hostile takeover bid for the company. Warner-Lambert had previously said it planned to merge with American Home Products Corp., but apparently concluded that the Pfizer bid might be better for its shareholders.
Merger plans have also recently been set by Pharmacia & Upjohn Inc. and Monsanto Co. And should Pfizer prevail in its $54 billion bid for Warner-Lambert, analysts expect American Home Products to set out in search of a new merger partner.
Earlier in the week, Ralph Larsen, chief executive of Johnson & Johnson, told a Bloomberg Forum he wouldn't rule out a merger of his company--the world's largest health care-products company. "I think it's unwise to simply make hard and fast statements that you will never do anything," Larsen said. He said, however, that he didn't see any deals on the horizon.
Glaxo Wellcome Inc., the company's U.S. unit, is one of the leading drug research firms in the United States, producing a wide variety of drugs for treating the HIV virus, viral herpes and influenza, as well as a number of drugs for respiratory problems. It does not at present sell any over-the-counter, nonprescription drugs. It sold the rights to Zantac, the heartburn drug, to Warner-Lambert in 1997.
SmithKline has numerous consumer products, including Tums antacid, Contac cold medicine, Aquafresh toothpaste and Nicorette and Nicoderm anti-smoking drugs and patches. The two top-selling drugs for the company are the antibiotic Augmentin and the antidepressant Paxil, with each accounting for $1 billion in annual sales.
The two drug companies are not the only longtime rivals involved in the merger talks. Glaxo Welcome has picked Goldman Sachs Group Inc. to serve as its investment adviser in the talks, a role held by the Lazard Group in the earlier talks. Lazard is now advising Pfizer in its talks with Warner-Lambert.
Morgan Stanley Dean Witter & Co. is advising SmithKline.
A source familiar with the talks said he did not believe it would take long to wrap up negotiations because the two sides had essentially negotiated an acceptable merger agreement two years ago before executive personalities scuttled the deal.
On the New York Stock Exchange, Glaxo's American depositary receipts rose $2.06 1/4, to $60, while SmithKline's ADRs rose $3.31 1/4, to $69.75.