SmithKline, Beecham Confirm Merger Talks

SmithKline Beckman Corp. and Beecham PLC confirmed Sunday that the companies are discussing a merger of most of their operations that could create one of the world’s largest pharmaceutical firms, but officials refused to give details.

In a news release from the Philadelphia-based SmithKline, the companies said no agreement has been finalized and cautioned that there was no assurance any agreement would be reached.

However, a Beecham official in London who asked not to be identified said the news release was a sign the companies “appear to have common ground.”

On Friday, the price of SmithKline stock jumped $5.25 after Beecham confirmed that it had hired the U.S. merger specialist Wasserstein, Perella & Co. as a financial adviser.

A report last week said Beecham, the British pharmaceutical and consumer products company, had held merger talks with SmithKline, a pharmaceutical and medical products company. The talks reportedly soured over questions about who would control the new firm.

The companies said in the Sunday release that the entity created by a merger “would be governed by a board of directors drawn equally from both companies and with management selected from both companies.” The release also said “major parts” of both businesses might be merged.

Under such a merger, current SmithKline and Beecham shareholders would own the new entity equally, the news release said.

The Beecham official said the companies have three common medicine divisions: prescription, over the counter and animal health.

“Those are the parts that lend themselves to merger,” he said.

The official said he did not know how long the discussions had been going on, but “you can assume it’s been for some time.”

An industry analyst said the tone of the announcement indicates that the companies are close to an agreement.

“I would judge from the tenor of the press release that they’re in the advanced stages of the negotiations,” said Richard Stover, an analyst with Alex Brown & Sons in New York.

The companies may have decided to confirm the merger talks were going on because “the rumors were just too intense,” Stover said.

Beecham’s U.S. operations are based in Pittsburgh. Its products include Aqua-Fresh toothpaste, Sucrets lozenges, Geritol vitamins and Williams Lectric Shave lotion.

SmithKline’s major prescription drugs are Tagamet, an ulcer medication, and Dyazide, used to treat high blood pressure.