Pharmaceutical giants announce mega-merger
29 Mar 2000
As PE goes to press, the UK's leading pharmaceutical companies, Glaxo Wellcome and SmithKline Beecham, have announced their intention to merge to form the world's biggest drug company with sales of £15billion and a 7.3 per cent share of the global pharmaceutical market. The new company, Glaxo SmithKline, would be worth £114billion at today's market prices and be one of Europe's largest companies.
The companies' decision to merge - with an approximate 59:41 Glaxo:SKB split in ownership - comes two years after an acrimonious breakdown in earlier discussions between the two boards, led by Glaxo's chairman Sir Richard Sykes and SKB's ceo Jan Leschly. Disagreement between the two over who should lead a merged company was widely believed to have led to the collapse of talks.
Following Leschly's decision to retire from SKB in April this year, Glaxo SmithKline will be led by his successor Jean-Pierre Garnier as ceo, with Sir Richard Sykes as non-executive chairman.
Although the corporate headquarters of the new company will be in London, Garnier is to run Glaxo SmithKline out of new operational headquarters in the US. Redundancies among the combined 107 000 workforce are `inevitable', according to the companies, but no details are available on numbers or locations.
Cost savings of up to £1billion a year are expected to result from the merger - with £250million arising from combining R&D activities and the rest from reducing overlaps in administration, selling, marketing and manufacturing. Savings from rationalising R&D are to be reinvested in R&D, say the companies. Currently, the annual R&D budget of the two is approximately £2.4billion.
Commented Jean-Pierre Garnier: `I am confident that, by combining R&D excellence with marketing strength and financial power, Glaxo SmithKline will lead the industry into the future.'
