$13.5 Billion Wiped Off Shares in Failed Pharma Merger

A proposed £110 billion merger between two pharmaceutical giants, Glaxo Wellcome and SmithKline Beecham, collapsed due to disagreements between their top executives. The breakdown in talks resulted in a £13.5 billion loss in shareholder value, with shares in both companies plummeting in value. The failed merger had promised annual savings of £1.5 billion and was expected to lead to the creation of one of the world's largest pharmaceutical companies.

Key Takeaways:

• The collapse of the merger talks resulted in a £13.5 billion loss in shareholder value, with shares in Glaxo Wellcome falling 13% and those in SmithKline Beecham falling 10%.
• The relationship between Sir Richard Sykes, chairman of Glaxo Wellcome, and Jan Leschly, chief executive of SmithKline Beecham, was at the heart of the breakdown in talks.
• The two executives had agreed that Leschly would become the chief executive of the merged group, but Glaxo Wellcome later reneged on this agreement.
• The merger would have led to the loss of 10,000 jobs, 2,000 of them in the UK.
• The Manufacturing Science Finance union welcomed the collapse of the merger, citing concerns over corporate greed and the potential loss of jobs.
• Analysts believe that the deal is unlikely to be resurrected and a hostile bid from either company is also seen as unlikely.

Statistics:

• £13.5 billion: the loss in shareholder value following the collapse of the merger talks.
• £1.5 billion: the estimated annual savings from the merger.
• £500 million: the loss in value of Mercury Asset Management's holdings in both companies.
• 51.8 points: the fall in the FTSE 100 index due to the collapse in shares.
• 13%: the fall in shares of Glaxo Wellcome.
• 10%: the fall in shares of SmithKline Beecham.

Sources:

• The Times, 1998