THE SMITHKLINE BEECHAM DEAL : Gaining Freedom : Beckman Instruments and Allergan Will Be Spun Off

Beckman Instruments and Allergan Inc., two Orange County firms that joined the company now known as SmithKline Beckman Corp. over the last decade, will become independent once again as the pharmaceutical giant spins off the two businesses.

SmithKline said it plans to turn over its Beckman and Allergan subsidiaries to its shareholders. SmithKline shareholders will be given one share of newly created Allergan stock for every two SmithKline shares they now own, and they’ll get one share of Beckman stock for every 5.5 of their SmithKline shares.

As independent firms, analysts estimate that Allergan, an Irvine maker of eye care products, could have a market value of nearly $2 billion, and Fullerton-based Beckman, a medical instruments firm, could be worth $750 million.

SmithKline purchased Allergan for $259 million in 1980, and Beckman for $1 billion in 1982. SmithKline sold a unit of Beckman in 1984 that accounted for about 20% of Beckman’s business.

Officials of the Orange County subsidiaries said they were excited about the prospects of becoming independent, which will allow them to make product and marketing decisions without going through a bureaucracy.

“I think everybody here is looking forward to our new independence,” said Allergan Senior Vice President Norris Battin. “ It’s an opportunity.”

The Orange County subsidiaries have been getting increasing independence from SmithKline in the past two years as SmithKline’s other businesses have slumped and the Orange County subsidiaries have become more profitable.

Analysts estimate that Allergan earned $80 million last year, accounting for nearly 35% of SmithKline’s 1988 earnings of $230 million. Beckman, which spun off 16% of its stock in November, earned $42.5 million last year.

“SmithKline raves about Allergan every chance it gets,” said Edward Froelich, an analyst at the brokerage firm of Pershing & Co. in New York.

Both Beckman and Allergan for a time enjoyed the advantages of being owned by a company with great resources.

With help from SmithKline, Allergan was able to buy its way into the contact lens-making business in 1987 by purchasing International Hydron for $155 million in cash. Before then, the company made contact lens care products, but not lenses.

“We might not have been able to do that without them,” said David Bruns, president of Allergan’s international operations.

Similarly, SmithKline’s large cash reserves helped Beckman when cuts in Medicare reimbursements forced hospitals to cut back on purchases and hurt its business. And SmithKline helped Beckman obtain a $235 million line of credit last year at the time of its first stock spin-off.

But Beckman Founder Arnold O. Beckman has voiced his frustration and disappointment with SmithKline’s management. In an interview earlier this year, Beckman complained that SmithKline did not provide the resources he had expected to help the company expand and diversify.

He said he looked forward to the day Beckman and SmithKline would go their separate ways.

“I hate to see Beckman Instruments’ welfare be dependent upon SmithKline,” 88-year-old Beckman said in the interview.

Beckman established Beckman Instruments in a Pasadena garage in 1935, building a business on the strength of his first commercial invention: a pH meter originally created to measure the sourness of lemon juice but ultimately found to have a myriad of laboratory uses.

Beckman didn’t take an active role in Beckman’s operations when the company was sold. But Allergan Chairman Gavin Herbert Jr., 56, whose father founded Allergan in 1949 above a Los Angeles pharmacy, has remained with the firm.

Allergan, which started by making an eye drop for children, now makes hundreds of products at manufacturing facilities in nine countries, and 40% of its 1988 revenue of $756 million came from international sales. The company had revenue of $100 million in 1980, the year it was purchased by SmithKline.

The colorful Herbert, who lives in an estate once inhabited by former President Richard M. Nixon and known as the Western White House, has become instrumental in Beckman’s operations as well as at Allergan. Herbert, a longtime friend of Arnold Beckman, sits on Beckman’s board and for a time last year supervised Beckman’s operations.