CNBC just mentioned MTC and an analysts meeting tomorrow. MTC's Searle was mentioned yesterday as a possible takeover candidate by AHP:
AHP , abandoned by SmithKline, seen (1-2)
Monday, February 2, 1998 02:23 PM
> By Brendan Intindola
NEW YORK, Feb 2 (Reuters) - American Home Products Corp. will focus quickly on acquiring
another drug company with a rich drug development pipeline after SmithKline Beecham Plc
(LSE:SB) abandoned AHP to assemble a stunning combination with Glaxo Wellcome Plc
(LSE:GLXO) , analysts said on Monday.
AHP, considered to have a lackluster drug development effort, is resolutely in the pharmaceutical
mergers and acquisitions arena, and is expected to swiftly find a deal to yield new products and
economies of scale, factors stoking a global industry consolidation, they said.
"American Home is on the prowl. The deal between Glaxo and SmithKline is going to prompt
further consolidation in the business. It is a whole new level of scale in research and development
and marketing, so American Home is an acquiror," said Barbara Ryan, drugs analyst at BT Alex.
Brown.
Glaxo and SmithKline said in a statement late Friday they were in advanced merger talks that, if
successful, would create the world's largest pharmaceutical company with annual sales of $26
billion.
The planned merger, which would be the largest in corporate history, would make
Glaxo/SmithKline the second largest company in the world behind U.S.-based General Electric Co
(NYSE:GE) .
Following the proposed merger, Glaxo shareholders would hold 59.5 percent and SmithKline
shareholders 40.5 percent of a combined entity.
Further, they said Glaxo Chief Executive Sir Richard Sykes would be exective chairman of the new
company, and Jan Leschly, SmithKline chief executive, would be chief executive and chairman of
the executive management committee.
American Home's new search will be dictated "by who they think has a full (drug development)
pipeline, strong R&D and synergies in the over-the-counter side," Ryan said. "Schering-Plough
(NYSE:SGP) is one (potential target) and the Searle division of Monsanto (NYSE:MTC) is
another."
Market speculation also pegged Pharmacia & Upjohn (Stockholm:PHU) (NYSE:PNU) as a
potential AHP merger partner, sentiment that pushed Pharmacia's American Depositary Receipts up
sharply Friday, adding 1-13/16 to 38-9/16, against a broader U.S. market drop.
In Monday trade, Pharmacia's ascent continued, adding 1-9/16 to 40, while SmithKline ADRs
were the most active NYSE issue, soaring 5-9/16 to 68-5/8. American Home shares sank 2-3/4 to
92-11/16 and Glaxo ADRs shot up 8-11/16 to 62-1/2.
Also, Schering-Plough added 4-3/4 to 77-1/8 and Monsanto increased 2-1/4 to 49-11/16.
An American Home spokesman declined to address all merger-related questions, but did not rule
out future acquisitions, saying, "We are always looking for opportunities."
He also declined to say what led to the cratering of the AHP-SmithKline merger talks, first
announced by the companies on January 21.
A SmithKline spokesman in Philadelphia also declined to comment on why the AHP negotiations
ended, or elaborate on when SmithKline expects to reach a formal merger agreement with Glaxo.
"I think Jack Stafford (American Home chairman and chief executive) will roll with the punches and
look for for the next merger candidate. He will probably look for a major pharmaceutical company
that has a great research presence, and not necessarily an opportunity to cut costs," said UBS
analyst Jerry Brimeyer.
He said another possible candidate to merge with AHP is Zeneca Group Plc (LSE:ZEN) , not only
due to its research, but also because it would be dwarfed in the U.K. by the combination of Glaxo
and SmithKline, both British companies.
"With a Glaxo/SmithKline merger, Zeneca is vulnerable in a lot of its primary markets," Brimeyer
said.
"It (an AHP-Zeneca deal) would have a complementary product mix. Zeneca, with its cancer and
migraine drugs, and American Home, with its franchise in women's health and arthritis drugs, would
be very-well positioned among general practitioners and specialists," he said.
Research also may have been a point of contention between American Home and SmithKline, he
added.
"There are major cultural differences between SmithKline and American Home," Brimeyer said.
"SmithKline is using the cutting edge of technology to develop drugs," he said. "There is high risk in
doing that. American Home is more conservative in is approach, which is 'Let's wait and see what is
proven,' then proceed from there."
"SmithKline was breaking new ground in drug discovery, and I think American Home would view
that as a high-risk strategy."
((-- N.Y. Equities, 212-859-1734)) REUTERS |
