SmithKline to Sell Its Animal Health Business : Drugs: British giant agrees to sell unit for $1.45 billion to focus on human care. Analysts hail plan.

British drug group SmithKline Beecham agreed Wednesday to sell its worldwide animal health business to Pfizer Inc. for $1.45 billion in cash as part of a strategy to concentrate on its human health care business.

SmithKline said it would concentrate on building on global synergies between its pharmaceutical, clinical laboratory and consumer health care businesses.

The sale was not entirely unexpected since SmithKline had indicated it would sell assets to help pay for two major acquisitions this year.

“SmithKline Beecham’s goal is to become world leader in human health care, and the sale today of our animal health business is another significant step toward that objective,” Chief Executive Jan Leschly said.

“In today’s environment, we believe the focus on human health care provides the greatest potential to enhance shareholder value.”

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SmithKline Beecham Animal Health had 1993 worldwide sales of $614 million, with operating profits of $104 million and net assets of approximately $348 million. It is the world leader in cattle, swine and companion animal vaccines.

“It’s a good deal. It reduces debt and gets them out of an operation in which they lacked critical mass,” said drugs analyst Franc Gregori at Banque Paribas in London.

In New York trading, SmithKline’s American shares were down 25 cents at $33 in late afternoon on the New York Stock Exchange. Pfizer dropped $2.375 to $72.50 on the NYSE.

Pfizer Chairman William Steere said, “This acquisition further builds on our strengths by adding SmithKline Beecham’s excellence in animal vaccines and companion-animal products.

“The combined businesses are complementary in products and in the animal species and geographic regions they serve,” Steere said.

Analysts said the purchase should boost Pfizer’s share of the market and increase its animal health unit’s profits. Pfizer’s animal health business contributed 8% of the New York-based company’s sales of $7.5 billion in 1993, and accounted for just 2% of its profits.

“This deal is part of the ongoing evolution of the animal health industry,” said Jim McCamant at the Medical Technology Stock Letter. “Everyone wants a good market share, and Pfizer increasing its size should add to its profits.”

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“Pfizer had said it wanted its animal health revenues at $1 billion by the end of the decade. With this deal they’ll be at $1 billion next year,” said Robert Hodgson, an analyst at Cowen and Co.

Animal health was seen as a prime candidate for a sell-off, although the price, representing more than twice the unit’s annual sales, was better than many analysts had expected.

SmithKline, under new boss Leschly, has built up debt of some $4 billion this year following the acquisition of U.S. pharmacy benefit manager Diversified Pharmaceutical Services and over-the-counter drug firm Sterling Health.