Despite Rumors of Other Suitors : SmithKline, Beecham Merger Is Expected

Despite new rumors that SmithKline Beckman Corp. has other suitors to compete with Beecham Group, SmithKline and Beecham may announce a merger as early as next week, industry sources said Thursday.

“The pressure is mounting for SmithKline and Beecham to reach a merger agreement since the companies disclosed that they were having merger discussions,” said Hemant Shah, an independent analyst in Warren, N.J.

“It is just a matter of weeks before they announce a merger,” a source close to the company said.

“The announcement of merger discussions put both of these in play, and now they are both under tremendous pressure,” Shah said. SmithKline and Beecham announced Sunday that merger discussions were taking place.

SmithKline’s stock has risen in heavy trading amid new rumors that other suitors had emerged to compete with British drug giant Beecham. Du Pont Co. and Nestle SA joined the roster of rumored SmithKline suitors Thursday.

Stock Falls

SmithKline’s shares closed up $3.125 at $67.25 Thursday on the New York Stock Exchange.

Philadelphia-based SmithKline declined comment.

“You can bet every investment banker on Wall Street is looking for a buyer on SmithKline,” said one analyst.

SmithKline’s stock fell Wednesday after an analyst for Sanford C. Bernstein Co. said there was a small chance another suitor would emerge for the Philadelphia-based pharmaceutical company. The analyst, Karl Haberman, also said a merger would involve a stock swap agreement and the value SmithKline shareholders would receive may be somewhere in the low $60-a-share range.

But analysts said Thursday that the value will be higher and will include cash. “The merger may include stock in the combined company and a good amount of cash,” Shah said.

One trader said, “The fast money guys got out yesterday because there were no new suitors mentioned. Now they are all back in because a new crop of names is emerging.”

Du Pont Mentioned

Du Pont has frequently been said to be interested in buying a U.S. drug company. A Du Pont spokesman declined comment on the SmithKline rumors. “We don’t comment on rumors,” he said.

Analysts said a Du Pont-SmithKline merger would make sense. “Logic would dictate a marriage between them,” said Jonathan Gelles, analyst with Wertheim Schroder.

Du Pont has several businesses that complement SmithKline’s, including clinical laboratory testing and diagnostics. Du Pont has also been selling SmithKline’s ulcer medication, Tagamet, to the hospital market since last year, Gelles said.

In addition, Du Pont has said it is interested in pharmaceuticals.