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Richard Sykes
This company won't move out of the UK
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Rory Cellan-Jones reports for BBC News
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Tuesday, 18 January, 2000, 09:41 GMT
Drugs giants merge

UK drugs giants Glaxo Wellcome and SmithKline Beecham have confirmed their plans to merge into the world's biggest pharmaceuticals group.

The deal creates the UK's largest company, valued at 130bn.

The new group, to be called Glaxo SmithKline, has said job losses are inevitable, but has declined to say how many will be cut.
Sir Richard Sykes
Glaxo's Sir Richard Sykes will be chairman

Glaxo SmithKline will be headed by Jean-Pierre Garnier, currently number two at SmithKline, who takes the role of chief executive while Glaxo head Sir Richard Sykes is to be non-executive chairman.

Its headquarters will be in London, while its operational base will be in the US. It will be listed on both the London and New York stock exchanges.
UK's largest companies
Glaxo SmithKline: 110bn
Vodafone: 109bn
BP Amoco: 107bn
BT: 83bn
HSBC: 64bn
Shell: 51bn
Astra Zeneca: 45bn
Lloyds TSB: 42bn
Marconi: 25bn
Barclays: 23bn
as of January 2000
The merger is expected to be completed in the summer of this year. It is unlikely to face any regulatory obstacles.

Job fears

Unions fear the tie-up will mean up to 15,000 job losses worldwide out of a workforce of 105,000 and they are worried about the shift of operations to the US.

"Staff have been kept completely in the dark and we need to now know how a company whose chief executive is going to live in the United States is going to have the same commitment to a company that has traditionally been the jewel in the British pharmaceutical crown," Roger Lyons, general secretary of the Manufacturing, Science and Finance union, said.

Mr Lyons also warned of a possible transfer of European jobs to the US.

"The European Commission will need to look at the regional job implications," he said.

Fears about job cuts had already prompted the MSF union to ask for a meeting with company chief executives and Trade and Industry Minister Lord Sainsbury on 26 February.

Investors, though, have welcomed the deal. However, in early trade, Glaxo dropped 50p to 17.68 while SmithKline Beecham was down 39p to 8809p. The shares had risen sharply on Friday when the merger talks were confirmed.

Glaxo on top

Glaxo shareholders are to own 58.75% of the new group and SmithKline investors 41.25%.
SmithKline Beecham
Annual turnover 8bn
Spends 750m a year on R&D
Employs 56,000 (8,300 in UK)

The new group would have sales of 17bn and 7.4% of world pharmaceuticals markets.

Savings are expected to be considerable, with 250m savings expected to come from combining their research and development. The group expects total annual savings of 1.1bn.

The new company will have an annual research and development budget of 2.4bn, the largest in the world.
Glaxo Wellcome
Annual turnover 8bn
Spends 1bn a year on R&D
Employs 59,000 worldwide (13,000 in UK)

The merged group will bring together a host of top drugs for aids, diabetes and asthma as well as traditional consumer products such as Lucozade and Ribena.

The two companies have attempted to merge before.

Two years ago, talks failed after a reported clash of egos between Glaxo chief executive Sir Richard Sykes and his SmithKline counterpart Jan Leschly, who is now to retire early.

There has been a wave of mergers in the drugs industry recently, with the UK's other main drug company, Zeneca, merging with Sweden's Astra, while in the United States Pfizer is proposing a tie-up with Warner Lambert that would have created, until today's announcement, the world's biggest drugs company.

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See also:

05 Jan 00 | Business
Record year for mergers
14 Jan 00 | Business
Drug giants back in merger talks
30 Dec 99 | Business
The insatiable merger appetite
13 Dec 99 | Business
Timetable of a merger
28 Jan 99 | The Company File
Europe's merger prospects
08 Dec 98 | Your Money
Riding the merger wave
10 Dec 98 | The Company File
Zeneca and Astra merge to form drug giant
24 Feb 98 | Business
Drug giants scrap merger
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