From the Sunday Times of London: Glaxo-BMY?
Glaxo plots £140bn American merger
Kirstie Hamilton and Matthew Lynn
GLAXO WELLCOME has been plotting the world's biggest merger by courting the American drug giant Bristol Myers Squibb. Combined, the two companies would have a market value of £140 billion, dwarfing both Vodafone's current £36 billion takeover of AirTouch and British Petroleum's £30 billion acquisition of Amoco last year.
Bankers representing both companies have discussed an agreed merger over the past two months and have drawn up a detailed plan to integrate two of the world's largest drug companies. Recently, though, talks have stalled. Glaxo remains enthusiastic about the benefits of a deal, but only if it could be achieved on the right terms.
The proposed company, which could be called Glaxo Bristol Myers, would tower over any of its peers. In terms of sales, Glaxo is third in the world, with £6.5 billion and a 4.2% share of the global market. Bristol Myers is only slightly behind in fifth place, with £5.5 billion sales and 3.9% of the market.
The combined company would have sales of more than £12 billion and would be almost twice the size of Novartis and Merck, which now jointly occupy the top slot.
Sir Richard Sykes, chairman of Glaxo, has long maintained that his aim is to create a company that has 10% of the pharmaceuticals market. This deal would take him within reach of achieving that goal. Yesterday Glaxo refused to comment.
Sykes worked at Squibb before joining Glaxo in 1983.
A year ago, he attempted a merger with Glaxo's British rival SmithKline Beecham. But the plan collapsed in acrimony even before it was formally ratified, with the two sides unable to agree on the distribution of the top jobs. Shareholders were furious and in the immediate aftermath Glaxo seriously considered a hostile bid for its rival.
With Bristol Myers, the management question could be more easily resolved. Charles Heimbold Jr, the chairman, is 66 and heading for retirement. He is credited in the past five years with having turned the company from a sluggish performer into one of the fastest growing in the industry.
It grew at 11% last year, compared with Glaxo's pedestrian 1% in what was always going to be a disappointing year owing to the loss of patent protection on its top-selling ulcer drug, Zantac.
Bristol Myers' pharmaceuticals business specialises in cardiovascular, anti-cancer and central nervous system drugs. It also makes toiletries and beauty products, including Clairol, the hair products advertised by Kate Moss. It produces medical devices such as orthopaedic implants and also makes non-prescription health products, including baby food.
Glaxo, by contrast, is solely a drug company, having spent much of the 1980s pulling out of other areas.
The pharmaceuticals industry has been shaken by a series of huge mergers in recent months. Zeneca, the British drugs group, is merging with its Swedish rival Astra, and Hoechst of Germany and Rhône-Poulenc of France are also attempting a merger.
American groups have not so far been important players in the recent drug-industry rationalisation moves. SmithKline attempted to merge with American Home Products but pulled out, preferring to talk to Glaxo.
People close to the talks said a deal would be viewed on both sides as a merger from a position of strength and not driven by patent expiry. It would also give the combined group vast resources to invest in research. The cost of genetic research, for example, is soaring and Sykes believes companies need to be larger to fund it.
Sykes would want to take an important role in any combined company, perhaps as chairman, but the chief executive's post could go to a Bristol Myers director.
|
