SmithKline Agrees to Beecham Merger : U.S.-British Company Will Be World’s Second-Largest Manufacturer of Drugs

PHILADELPHIA â€”  SmithKline Beckman Corp. and Britain’s Beecham Group PLC announced today that they have agreed to merge to form the world’s second-largest drug maker.

“For SmithKline, this merger marks the beginning of a promising new chapter for our employees, our shareholders and our customers,� SmithKline Beckman Chairman Henry Wendt said at a news conference.

“We will have one of the best and largest research and development organizations in the world, drawing on the scientific skills and traditions of the United States and Britain,� Wendt said.

The merger will be an even match, with shareholders in SmithKline receiving half the stock in the new company and Beecham shareholders receiving the other half, officials said.

SmithKline shareholders would also receive, however, a one-time cash dividend of $5.50 per share.

Approval Required

The merger, subject to shareholder and government approval, would create a company with annual sales of about $6.7 billion. It would rank second in global pharmaceutical sales behind Merck & Co., second in over-the-counter medicines behind American Home Products Corp. and fourth in animal health.

Wendt, 55, chairman and chief executive officer of SmithKline, would become chairman of SmithKline Beecham and Robert Bauman, Beecham’s chairman, would become chief executive officer of the new company.

SmithKline and Beecham announced April 2 that they had been discussing a merger, confirming rumors that started late last year. Since the announcement, SmithKline’s stock has regularly been among the most actively traded issues on the New York Stock Exchange.

Two SmithKline subsidiaries, Allergan, an eye- and skin-care business based in Irvine, and 84% of Beckman Instruments, which makes diagnostic and laboratory equipment and is based in Fullerton, would be spun off to SmithKline shareholders, the companies said in a joint statement. SmithKline last fall sold 16% of Beckman through a public stock offering.

Meanwhile, Beecham plans to sell off its cosmetics and fragrance divisions, plus other non-pharmaceutical businesses.

Markets Will Open

The deal would open the U.S. and Japanese markets, two of SmithKline’s strengths, for Beecham. SmithKline would gain from several promising prescription drugs being developed by Beecham.

The combined company would market Beecham over-the-counter drugs such as Tums antacids, Sucrets throat lozenges and Massengill douche.