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Tuesday, February 24, 1998 Published at 09:28 GMT


Failed merger triggers shares wipeout
image: [ The City reacted with shock to the collapsed deal ]
The City reacted with shock to the collapsed deal

About £20bn has been wiped off the value of leading shares in the opening minutes of trading at the London stock exchange. It follows the collapse of merger talks between drugs giants Glaxo Wellcome and SmithKline Beecham.

The FTSE 100 index fell by 110.5 points to 5592.3 as the City reacted to the collapse of a deal that would have created the world's second largest company.

Shares in Glaxo Wellcome plunged by 303p to £16.10, while SmithKline Beecham fell by 92p to 715p in the wake of Monday night's announcement after trading on Wall Street closed.

When the proposed merger was first revealed, the stock prices of both companies soared. SmithKline had a market value of £43 billion and Glaxo Wellcome £57 billion before the talks were announced.

Dealers gambled on which companies would be next to fall to a takeover bid or a merger, with rivals Zeneca and Nycomed Amersham among the big risers earlier this month.

Zeneca tumbled 140p to £23.45 in early trading on Tuesday morning as it felt the backdraught from the Glaxo-SmithKline announcement.

But Nycomed survived the rout and edged up 35p to £23.35 - a signal that traders are betting that the expected wave of mergers and takeovers has not yet come to an end.

A question mark now hangs over the future direction of SmithKline Beecham, because it was in talks with American Home Products Corporation until it shocked the City by breaking off negotiations to announce the Glaxo talks.

But there was relief among trade unions that the planned deal has been called off, following their warning that up to 20,000 jobs could be at risk as a result of the merger.

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