SmithKline to Lay Off 10% of Staff, Close 60 Facilities

SmithKline Beecham PLC, the result of one of the pharmaceutical industry’s biggest marriages, said Wednesday that it took a pretax charge of nearly $1 billion last year and will cut 10% of its work force and close 60 offices and factories.

The company said it will “reduce the number of management layers,” consolidate many sites and centralize purchasing, manufacturing and distribution activities.

Headquartered in London, the world’s third-largest drug company was formed last July in a merger of Philadelphia’s SmithKline Beckman Corp. and Britain’s Beecham Group PLC.

The company’s Southern California subsidiaries became independent firms after the 1989 merger. Beckman Instruments, a Fullerton-based maker of medical instruments, and Allergan Inc. of Irvine, a maker of eye care products, were spun off to SmithKline shareholders.

SmithKline Beecham said it took a charge of $807 million to close 20 offices, eight production plants, 25 distribution plants and seven research and development sites, reduce its work force of 55,000 and write down assets. It also took a charge of $124 million for costs related to the merger.

It said those charges were partially offset by a tax credit of $158 million and after-tax profit of $215 million from the sale of operations before Dec. 31, 1989.

It is the first time that the merged company, which has a market value of $15 billion, has reported its financial results.

Including the charges and credits, the company’s profits last year were $210 million, compared with $592.5 million in 1988. Sales from continuing operations were $6.9 billion, up 16% over the previous year.

The report disappointed Wall Street, where the company’s American Depositary Receipts dropped $1.75 to $40.875 a share.

At a news conference in London, SmithKline Beecham Chief Executive Robert Bauman said further restructuring charges were not expected. “We are not planning to come back with further provisions,” Bauman said.

“It has been a highly complex undertaking,” said Chairman Henry Wendt.

In a joint statement the executives said: “We are pleased with the progress we have made in creating our new company. The restructuring charge announced today reflects the many actions we have already decided to take.”

They said the company’s main priorities will be to reduce its debt and interest costs. Its overall debt totals $3.2 billion, a company spokesman said.

Last year, the company sold a number of non-core businesses, but it failed to sell its array of cosmetic companies, including Yardley, Lentheric, Astor and Lancaster, which analysts had expected to be sold for nearly $1 billion.

Bauman said talks on the sales were ongoing, but he acknowledged that the company “will not achieve the type of sales proceeds that were anticipated.”