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To: Henry Niman who wrote (24151)	12/8/1998 11:05:00 PM
From: JEB	Read Replies (2) \| Respond to of 119973

Zeneca / Astra pharmaceutical merger: (BGEN should get a kick from this) Zeneca and Astra plan $70bn merger By William Lewis in New York, Tim Burt in Stockholm and David Pilling in London Zeneca, the UK drugs group, and Astra, the Swedish drugs pharmaceuticals group, are expected today to announce the largest-ever European merger. If successfully completed it will create a company with a market capitalisation of approximately $70bn, making it one of the world's largest pharmaceutical groups. At yesterday's market close Zeneca had a market capitalisation of $39bn and Astra $31bn. Last night, following inquiries by the Financial Times, Zeneca said that it was in advanced merger talks with Astra. but declined to comment further. However A spokeswoman for Zeneca said: 'Following recent speculation, the boards of Astra and Zeneca announce that they are in engaged in advanced discussions regarding a possible combination of the two companies in a merger-of-equals transaction.' People close to the transaction deal in London and Stockholm said they expected the all-stock merger deal to be announced this morning. The combined company would have estimated annual sales this year of approximately $16.2bn and pre-tax profits of $3.59bn. The expected Zeneca-Astra deal follows the announcement that Germany's Hoechst and France's Rhone-Poulenc are to merge their life science businesses into Aventis, and that Sanofi and Synthelabo, two medium-sized French groups, are also to merge. The wave of mergers is being fuelled by the need to spend an average of $500m on each new drug product, only a few of which go on to become $1bn blockbusters. Rapid advances in biology, particularly in the field of genomics, are presenting companies with hundreds of new drug leads, stretching their R&D budgets even further. However a handful of mega-deals have collapsed after being announced, including the proposed merger of SmithKline Beecham and Glaxo, and Monsanto and American Home Products. In recent months Astra has made clear its desire to link with another leading drugs company and its chief executive Hakan Mogren has gone as far to flag Zeneca as the Swedish group's preferred partner. Earlier this year Astra cleared the way for a merger by negotiating to acquire control of its US joint venture from Merck, one of North America's largest drug manufacturers. In recent days Mr Mogren is thought to have played a pivotal role in persuading Investor, the investment vehicle of Sweden's Wallenberg business empire, to accept the deal with Astra. Investor, which controls 12 per cent of Astra's voting shares and 10 per cent of the capital, was yesterday said to have responded coolly to the initial merger proposal. Astra represents 27 per cent of Investor's share portfolio and has been one of the main factors behind its recent growth. For the merged group, Astra will contribute its blockbuster anti-ulcer drug Losec, the world's best selling prescription drug. The Swedish group also boasts a large presence in Europe, where sales rose 10 per cent to SKr18.8bn in the first nine months of the year. For the group as a whole, pre-tax profits rose from SKr10.5bn to SKr11.3bn on sales up 20 per cent to SKr39.1bn for that period. Zeneca, which last month announced it intended to sell its specialty chemicals unit, offers a strong product stream in North America. Worldwide it has particular strength in cancer prevention, where it ranks second in the world, as well as in the $35bn cardiovascular market, where it is fourth. Last year, Zeneca's pre-tax profits rose 7 per cent to £1.08bn on sales of £5.29bn, of which about £700m came from specialty chemicals. Nevertheless, analysts have been concerned that Zeneca's drug pipeline may dry up in the short term and it remains unclear whether Astra, which has even bigger patent-expiry problems of its own, will effectively fill that gap. Zeneca also has a big agro-chemicals business, which accounts for 30 per cent of the UK group's sales and 20 per cent of its profits. It may now be sold off. Expectations of an imminent merger announcement have prompted a 7.4 per cent increase in Astra's shares over the past month. Yesterday in Stockholm, Astra's most commonly traded A shares rose SKr4 to SKr151. Zeneca's stock price closed at £24.76 last night, up 2.4 per cent on the day.