SmithKline Beecham ends merger talks

PHILADELPHIA - SmithKline Beecham announced it has ended merger discussions with British rival Glaxo Wellcome.

The surprising decision was made by SmithKline Beecham's board of directors, who previously seemed to be in favor of a merger that would have created the largest pharmaceutical company in the world.

According to a statement released to the press by SmithKline Beecham on Feb. 23, discussions derailed because Glaxo Wellcome would not proceed according to original agreements made about management issues in January.

"In discussions since then, and despite considerable effort on the part of SmithKline Beecham, including initiating a dialogue between SmithKline Beecham's non-executive chairman and Glaxo's non-executive deputy chairman, Glaxo has been unwilling to proceed in accordance with the agreed arrangements," SmithKline Beecham announced.

SmithKline Beecham went on to say that "differences in the approach to the possible merger, management philosophy and corporate culture" and "Glaxo's recent conduct of these discussions" had strained relations between the two companies and prevented the SmithKline Beecham's board from recommending further action.

Glaxo Wellcome, on the other hand, simply announced that merger discussions had ended.

The share value of both companies' stock on the New York Stock Exchange dropped after the announcement. Glaxo Wellcome's share price fell nearly seven points to $551⁄2 per share, and SmithKline Beecham's dipped six points to $60 per share.

Standard & Poor's, the London-based company that evaluates long-term corporate credit and senior unsecured ratings of publicly traded companies, said the outlook is stable for Glaxo Wellcome and positive for SmithKline Beecham. It also opined that there is no strategic necessity for either company to proceed with a merger in the near future.

Although Glaxo Wellcome could pursue SmithKline Beecham in an unsolicited bid, it is unlikely to do so. Standard & Poor's, for one, indicated that in terms of corporate credit ratings, "debt-financed major strategic moves would likely be viewed negatively." PR