Merger speculation prompted heavy trading Wednesday in the stock of Philadelphia pharmaceutical giant SmithKline Beckman, and the company’s Beckman Instruments subsidiary in Fullerton said it had adopted a “shareholder rights” takeover defense.
A Philadelphia newspaper reported Wednesday that SmithKline Beckman, which has been the subject of recurring takeover speculation in recent months, had discussed a merger with British medical supplies manufacturer Beecham PLC late last year.
The Philadelphia Inquirer said SmithKline discussed merging its prescription drug business with Beecham and selling its non-drug businesses such as Beckman, which makes medical instruments.
SmithKline has disappointed investors because its leading drug, the ulcer medication Tagamet, is faltering, and the company has not found another major product to replace it.
The discussions with Beecham broke up over the issue of who would control the new company, the Inquirer said, and it was not clear whether the talks were continuing.
Nevertheless, SmithKline stock jumped $2.25 a share to close at $54.875 Wednesday on trading on the New York Stock Exchange of nearly 1.6 million shares.
Beckman Instruments, meanwhile, said its board had approved a plan that would make a hostile takeover of the firm prohibitively expensive. The measure is identical to a poison pill defense already in place at SmithKline Beckman.
“We know of no effort to take control of the company at this point,” said Jay Steffenhagen, manager of investment relations at Beckman Instruments.
About 16% of Beckman Instruments stock was sold to the public last year by SmithKline Beckman, and executives at the parent company have confirmed that additional stock sales or even a complete spinoff are under consideration as the company evaluates its options.
Steffenhagen said Beckman Instruments had not been told whether SmithKline would sell more stock to the public. But analysts said it seemed likely, since 84% of Beckman is still owned by SmithKline and the subsidiary would not be vulnerable to a hostile takeover unless more than half of its stock is in public hands.
On adoption of the poison bill defense, Samuel D. Isaly, an analyst at S. G. Warburg & Co., said: “You can infer it’s a preliminary to more shares being sold to the public. There’s no other reason to do it, since the control of Beckman now is not an issue.”
Analysts said that while they had heard the Beecham rumors concerning SmithKline for months, they hadn’t heard of any potential big buyers waiting in the wings to snap up Beckman.