Here's yesterday's FT on the SBH/AHP merger:
Pharmaceuticals: SmithKline and AHP 'aim
to agree merger deal soon'
THURSDAY JANUARY 22 1998
By Daniel Green in London and William Lewis in New York
SmithKline Beecham and American Home Products aim to agree their
proposed merger, which would be the biggest in history, within two to three
weeks.
Both pharmaceutical giants are keen to avoid damaging staff morale. "This
thing is either going to happen soon or not at all," said one source. "The
strategic logic is driving the talks, but this week's announcement was
premature and there remain a number of issues to resolve."
The differences appear to be over the physical location of the combined
group's headquarters and the composition of the top management team.
There may also be a gap in how each side sees the potential liabilities arising
from Redux, AHP's slimming drug which was withdrawn from sale in
September because of reported side-effects. Estimates of the potential liability
range from $2bn to $4bn. Projected annual cost savings arising from the
merger are estimated to be about œ1bn, somewhat less than the figures
suggested by some analysts.
Yet the two companies are close enough to make a 50-50 merger of equals
the most likely structure of the deal. Although SmithKline is growing more
quickly, AHP is larger by sales and its share price reflects the slower growth.
Jack Stafford, chief executive of AHP, is said to view SmithKline's
management team as the one he wants to manage AHP's assets. He wants to
remain in a senior management position for 12 to 18 months after the merger
is completed.
Unlike the previous largest pharmaceuticals industry merger - by Swiss
companies Ciba and Sandoz to form Novartis in 1996 - there appear to be no
significant differences over desirable disposals or spin-offs after a merger is
completed.
Jan Leschly, chief executive of SmithKline, flew back on Tuesday to his US
base in Philadelphia, where AHP also has its main pharmaceuticals operation,
Wyeth Ayerst. Mr Leschly spends more time in the US than the UK even
now.
The newly merged company is likely to have its primary listing in New York
rather than London, and that is likely to lead to sales of SmithKline shares by
funds that track the FTSE 100 index.
Neither company is thought to be particularly concerned about this, believing
that funds tracking US indices will have to buy more shares in the merged
company.
On Tuesday, following a report in the FT that talks had been taking place,
both companies put out a statement confirming they were considering merging.
Talks had been going on for several months, and detailed negotiations began
in early November. AHP had hoped to be able to announce the deal before
Thanksgiving, November 27, and before Mr Stafford was due to go into
hospital for an operation.
The two companies were unable to complete their talks by that time, and
negotiations did not restart until late December. |
