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Monday, 17 January, 2000, 10:23 GMT
Merger's troubled history
research lab
The merger aims to save money on drug research
The merger of SmithKline Beecham and Glaxo Wellcome is the second attempt to bring together the UK's two leading pharmaceutical companies.

Two years ago, the two companies also held merger talks, but the plan broke down because of a clash who would run the merged company.

The UK's highest paid executive, Jan Leschly of SmithKline, was unwilling to play second fiddle to Glaxo's dynamic chairman, Richard Sykes.
Jan Lesschly: head of SmithKline Beecham
Jan Leschly: refused to merge
This time round the companies are taking no chances.

Mr Leschly, who is set to retire this year, will be well-rewarded for stepping down early, while his deputy, Jean-Pierre Garnier, will become chief executive.

Meanwhile, Richard Sykes, who will become chairman of the merged group, is likely to stand down in 2002, when he reaches 60, to take up an academic post.

Merger mania
Merger timetable
1996: Two companies begin talks on merging R&D
Jan 1998: SmithKline in merger talks with AHP
Feb 1998 :SmithKline announces deal with Glaxo, then calls it off
Dec 1998: Zeneca announces merger with Swden's Astra
Nov 1999: Warner Lambert proposes deal with AHP
Dec 1999: Jan Leschley announces early retirement
Jan 2000: Pfizer bid for Warner Lambert accepted
Jan 2000: Glaxo and SmithKline announce 130bn deal
At the time, the merger talks were precipitated by the news that SmithKline Beecham was in merger talks with American Home Products, a US pharmaceutical company - a deal which would have led to SmithKline overtaking Glaxo Wellcome as the UK's biggest drugs company.

This time, it was another jilting of the unlucky American Home Products that gave urgency to the merger.

On Friday, Warner Lambert said it was abandoning its planned merger with AHP, instead agreeing to enter into talks for a link-up with Pfizer, which could create the biggest drugs company in the world.

Not wanting to be overshadowed, Glaxo and SmithKline decided to accelerate their merger schedule.

Troubled history

Both companies are themselves products of huge mergers, as the UK pharmaceuticals industry continues to consolidate.

Glaxo Wellcome was created in 1995, in what was then the UK's largest merger, in a 9bn deal.

SmithKline Beecham was the product of a merger between a US drugs company with Beecham's, one of the oldest UK drugs companies that specialised in over-the-counter remedies, in 1989.

At one time they were bitter rivals, as Glaxo's anti-ulcer drug Zantac pushed SmithKline's Tagamet off pharmacy shelves.

The pace of mergers in the pharmaceuticals industry accelerated in 1998.

The UK's other major pharmaceutical company, Zeneca, a spin-off of chemicals company ICI, tied up with Sweden's Astra.

Nor is the trend confined to the UK.

On Continental Europe, two of the biggest chemicals companies, Hoechst and Rhone Poulenc, have just merged their pharmaceuticals business to form Aventis.

And Sweden's Pharmacia, which had earlier merged with Upjohn of the US, has just swallowed up Monsanto, famous for its production of GM seeds, but which also has a strong drugs business.

That merger was worth $52bn (32bn), and only created the seventh largest drugs group - a sign of how rapidly the value of drugs companies has gone up in the merger boom.

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See also:

29 Mar 99 | The Company File
Glaxo back on merger trail?
31 Jan 98 | Business
Drug companies in merger talks
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