SmithKline Shares Rise After American Home-Monsanto Talks End
Bloomberg News
October 13, 1998, 12:13 a.m. ET
SmithKline Shares Rise After American Home-Monsanto Talks End
London, Oct. 13 (Bloomberg) -- SmithKline Beecham Plc shares
rose in London after U.S. rivals American Home Products Corp. and
Monsanto Co. called off merger talks. The rise was prompted by
speculation that London-based drugmaker SmithKline could reopen
merger talks with American Home that ended in January.
SmithKline shares closed up 24 pence, or 3.9 percent, at
640p. In New York, the company's American depositary receipts
were recently up 2 at 53 7/8.
Analysts said it's highly unlikely SmithKline will again
seek a merger with Madison, New Jersey-based American Home after
talks failed earlier this year on worries over American Home's
legal liabilities, management roles and other issues. Amid
continuing speculation of consolidation in the industry to cut
costs, SmithKline began merger talks in February with Glaxo
Wellcome Plc; these also failed three weeks later.
Kevin Scotcher, an analyst with BT Alex. Brown in London,
called SmithKline's share jump ''a gut reaction of the market,''
which didn't reflect any likelihood that SmithKline and American
Home may reopen talks. After both sets of talks failed,
SmithKline has maintained it has a bright future as an
independent company.
''SmithKline would have to turn on a sixpence yet again to
do a deal with American Home,'' said Scotcher. ''Anything is
possible but not likely.''
Lionel Wilson, an analyst with Townsley & Co., a London
brokerage, said a revival of the SmithKline-American Home talks
was out of the question. SmithKline, he said, has repeatedly told
shareholders it won't reopen talks with American Home.
''The market is reacting incorrectly on SmithKline,'' said
Wilson. ''SmithKline told shareholders it would not be getting
back into bed with American Home and shareholders would not
accept it if they did.''
Meanwhile, some U.S. investors said they'd expected American
Home and Monsanto to fail at their $35 billion merger, saying
American Home could find a better partner.
Robert Chapman, chief executive of Los Angeles-based Chapman
Capital LLC, an arbitrage firm, said he sold American Home shares
short -- betting on a decline -- because he didn't think the
companies would merge.
''This was one of the worst mergers I have ever seen,'' said
Chapman. ''American Home was buying an overvalued, decelerating
business which is imploding because of its seed business. They
should get a closer look at their partners before asking them to
dance.''
American Home shares fell 3 7/8 to 46 1/8. Monsanto shares
fell 12 1/8 to 38 1/4.
--Dane Hamilton in the London newsroom (44-171) 330-7727/ph |
