Glaxo-Smithkline Merger

Managers meet today to finalise deal as unions call for urgent talks Teams of senior managers from Glaxo Wellcome and SmithKline Beecham plan to meet today in London to finalise the details of their £100 billion merger to create the worlds biggest drugs company. The talks on the structure of the new company, likely to be called Glaxo SmithKline, are likely to take about two weeks. The proposed executive appointments reflect the 59.5 per cent stake Glaxos shareholders will have in the new company. Of the five board members announced so far, three come from Glaxo. Sir Richard Sykes, Glaxos chairman, is set to be Glaxo SmithKlines executive chairman, while Jan Leschly, the Danish chief executive of SmithKline would keep the same title in the new company. The talks will take place against a likely background of sharp rises in the companies share prices yesterday and concern among staff and trade unions over job losses. However, shares in US company American Home Products are likely to fall sharply. On January 20, when merger talks between AHP and SmithKline were confirmed, they rose 16 per cent. The announcement that those talks had been abandoned came after the New York Stock Exchange closed on Friday. Union officials have called for urgent talks with the companies this week and are especially concerned at the prospect of job losses among skilled scientists. Jobs at the companies sites in the US and France could also be lost as both companies have extensive operations there. If the deal goes ahead, it will be only the latest in a series of big mergers and takeovers in the drugs industry since 1993, when many governments drew up plans to control the rising cost of healthcare. Previous mergers suggest that job losses at SmithKline and Glaxo of about 10 per cent are likely. The companies employ a total of 110,000. The level of cuts in the UK is likely to be higher as both companies have research and development, marketing and sales offices near London. Cuts of up to 20 per cent in the UKs 21,000 workforce are possible. Not all the Glaxo and SmithKline sites in the north and west of London are likely to survive. SmithKlines headquarters at Brentford looks especially vulnerable. Last year, SmithKline won permission to build large offices close to Glaxos UK marketing headquarters. Some of the two companies manufacturing sites in the north of England and Scotland are also vulnerable. The companies hope to make the detailed merger announcement by February 17 when SmithKline Beecham is scheduled to publish its 1997 annual results, or by February 19, Glaxos results day.