Here's more from London:
Huge job losses in drugs merger
By Neil Bennett
See graphic: Glaxo SmithKline- the new colossus
UP to 10,000 jobs will be lost in the œ100bn merger of Glaxo Wellcome
and SmithKline Beecham, as analysts predicted that the new group would
plan to cut costs by more than œ1bn a year.
The enlarged group is expected to shed at least a tenth of its workforce by
merging its research and development and sales and marketing operations
in Europe and America. About 2,000 of the jobs will be lost in Britain, out
of a 21,000 workforce. The cuts are forecast to boost group profits to
more than œ5bn by 2000.
Glaxo and SB announced plans late on Friday to merge and create the
world's largest pharmaceutical group, with sales of more than œ16bn a
year. SB also announced it was abandoning its earlier plans for a merger
with American Home Products, the US drugs group.
The new group, which is expected to be named Glaxo SmithKline, will
have its head office in London and will keep Glaxo's research centre in
Stevenage, Hertfordshire, and SB's in Harlow, Essex. But SB's head
offices and many of its other operations in Brentford, West London are
expected to be closed.
Yesterday it emerged that the two companies first held protracted merger
talks a year ago, but these broke down after the two sides failed to agree a
price and also could not decide on a role for Sean Lance, Glaxo's then
chief executive. It was only then that SB decided to look at US companies
for potential merger partners.
Last year's detailed discussions took place over several weeks and both
companies used the data from the talks as a basis for the rapid negotiations
about this merger that started last Monday when Sir Richard Sykes,
Glaxo's chairman, met Jan Leschly, SB's chief executive, in New York.
The deal became possible following the departure of Lance last October.
Sykes and Leschly hammered out the broad outline of the deal between
Monday and Wednesday last week in secret, even though SB was still
negotiating a merger with AHP. Leschly telephoned Jack Stafford, AHP's
president, on Friday night to tell him SB was pulling out of the deal.
AHP is now said by analysts to be in play and many expected to find
another merger partner, such as Pharmacia & Upjohn, or to be bid for.
Under the terms of the deal, Glaxo will be the senior partner in the merger.
Its shareholders will take 59.5 per cent of the shares of the enlarged group,
while SB will take 40.5 per cent. Sykes will become executive chairman
with Leschly as chief executive.
Both Sir Peter Walters, SB's chairman, and Hugh Collum, the finance
director, are expected to leave, although they may be offered posts as
non-executive directors.
Union leaders reacted with shock to news of the deal and said they were
planning emergency meetings to discuss the implications. "It has all been
done in secret," said Roger Lyons, general secretary of the Manufacturing
Science and Finance Union.
Glaxo shares are expected to soar when the stockmarket opens tomorrow
morning, on forecasts that the merger could lead to a massive boost to the
group's earnings. But analysts also warned that the competition authorities
would look closely at the merger.
Among the areas the new group will be strongest in is anti-viral medicine
and some analysts predict the group will have to sell Famvir, SB's
anti-herpes drug, to meet anti-trust guidelines.
The enlarged group is also expected to review the SB portfolio of
consumer businesses since Sykes is committed to maintaining Glaxo as a
pure pharmaceutical business.
A series of SB's products, including Lucozade and Ribena soft drinks and
Aquafresh toothpaste could come up for sale. |
