Speaking of appreciation, the big pharmas seem to be interested in anything out there on the potential merger. Here's what the Philadelphia Inquirer said last week:
2 drug firms in talks to merge
SmithKline and American Home Products employ thousands here.
It would be the most expensive merger ever.
By Donna Shaw
and Josh Goldstein
INQUIRER STAFF WRITERS
SmithKline Beecham and American Home Products
Corp. yesterday confirmed what has been rumored for days: They are
holding talks that, if successful, would result in the most expensive
corporate merger in history.
In separate statements, the companies stressed there were no assurances
that the deal would be consummated. They said no further statements
would be issued "unless and until" the discussions were concluded and an
agreement was reached.
The merger would create a pharmaceutical and health-care-products giant
-- the largest or second-largest drug company in the world, depending
upon whether sales or market capitalization is used as the standard. It
would be the No. 1 maker of over-the-counter, consumer-health
products.
SmithKline and AHP have a combined $26.5 billion in annual sales and
110,000 employees worldwide, including thousands in the Philadelphia
area.
SmithKline, which has about 7,000 local workers, is a British company
with its U.S. headquarters in Philadelphia. AHP's Wyeth-Ayerst
Laboratories has major research sites in St. Davids and Princeton, but the
company declined to say how many people were employed in the area.
The companies manufacture and sell dozens of well-known products.
Those include SmithKline's Amoxil and Augmentin antibiotics; Coreg
heart medicine; Tagamet ulcer drug; vaccines against hepatitis A and B,
diphtheria, tetanus and whooping cough; and over-the-counter products
Contac, Nicorette, Sucrets, Phillips Milk of Magnesia, Tums, Geritol and
Aquafresh toothpaste.
American Home's brands include Premarin, the top-selling estrogen-
replacement product with $1 billion in annual sales; Advil, Anacin, Dristan
and Robitussin cough and cold products; Centrum vitamins; Chap Stick;
and Preparation H.
At yesterday's stock price midday, SmithKline Beecham is valued at more
than $63 billion and AHP is worth about $58 billion. The most expensive
merger to date is the pending purchase of MCI Communications Corp. by
WorldCom for stock worth approximately $37 billion.
As they have since the rumors of a possible merger first leaked out last
week, Wall Street investors reacted with enthusiasm. American Home
shares rose $13.56 to close at $94.25 on a volume of 11.2 million shares;
SmithKline gained $2.56 to close at $59.56 on a volume of nearly 3
million shares.
Analysts said that while it is too soon to tell how much, there could be
cost-cutting of 30 percent or more in operating expenses, including sizable
job losses.
"It will be substantial," said analyst Hemant K. Shah, of HKS & Co.
The cuts, he said, "will be across the board in sales, marketing, R&D,
distribution, administration, marketing and manufacturing."
There are "a lot of things to work out" before a merger could occur, Shah
cautioned, but "I think it makes a lot of sense, and given that both
managements want to do it, the likelihood of it occurring is very good."
Edmund A. Debler, an analyst with Mehta Partners, said that "as far as
jobs in the Philadelphia area, I would say jobs will probably be at risk."
Debler and others said the companies were a good fit, with
complementary product lines in areas such as cardiovascular,
gastrointestinal and antibiotic drugs.
"The companies tend to be in similar therapeutic areas, but one company
significantly outsells the other in the respective area," Debler said.
"Each company will help the other in terms of one being more dominant. .
. . I can't imagine that they can't come up with some cost-saving synergies
with these overlaps."
At SmithKline's Center City headquarters yesterday, the company posted
notices confirming the merger talks. Some employees said the
bulletin-board postings had caused a little anxiety, but most said it was too
early to worry. Few of the companies' employees were willing to give
their names when discussing the proposed merger.
"I think everybody is still just shocked about it," said a senior analyst with
more than 30 years with the company. "When we merged with Beecham [
in 1989 ] we went through the same thing, the uncertainty about how
things were going to change, what the company structure would be, and
whether we would keep our jobs."
Nonetheless, she said, people were not overly concerned that changes
would come soon: "It's really business as usual."
But the potential merger was certainly a hot topic for discussion,
according to a computer consultant who has worked for SmithKline off
and on for more than 20 years. He said he had heard five conversations
on the subject in three hours.
But "no one seems excited one way or another. It's still premature for
anyone to take a position," he added.
A temporary worker who has worked at SmithKline for two months said
she feared a merger might hurt her chances at getting permanent
employment with the company. "I hope it doesn't happen, because my
sister worked at CoreStates and she's getting laid off because of the
merger" with First Union, the woman said.
At the Wyeth-Ayerst Laboratories campus in St. Davids, employees said
talk of a possible merger began buzzing through company corridors in
earnest yesterday morning, spurred by the brief statement from AHP.
"The company is not telling us anything," said one employee, who did not
want to be identified.
It was enough to prompt many to begin a giddy day-long vigil, watching
the price of their parent company's stock soar.
Molecular biologist Eric Beer of Upper Darby said he arrived at work
about 9 a.m. and heard coworkers, many of whom hold company stock,
discussing the possible merger as soon as he stepped onto the elevator.
"There's talk, but that's about all I know," Beer said.
Asked how a merger might affect jobs, a small sampling of Wyeth-Ayerst
employees said they were unsure but not particularly concerned. "We feel
like we're really strong" as a company, said one worker.
SmithKline Beecham and American Home Products both have roots in
Philadelphia.
John K. Smith opened his first drugstore in Philadelphia in 1830, 12 years
before a druggist named Thomas Beecham launched his Beecham's Pills
laxative business. In 1865, a young bookkeeper named Mahlon Kline
joined John K. Smith & Co., and it was renamed Smith, Kline & Co.
Wyeth got its start in 1860 in Philadelphia, where John Wyeth and his
brother Frank operated a drugstore. John Wyeth & Brother went on to
build a manufacturing plant on Washington Avenue. American Home
Products, which was founded in 1926, purchased Wyeth in 1931 from
Harvard University, which had received the company as a bequest from
John Wyeth's son, Stuart.
Inquirer correspondent Mary Blakinger and Inquirer wire services
contributed to this article. |
