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Drugs

SmithKline Beecham Considers Pounds 2.7 Billion Spin-Off

Strategic Insights

— 1 min read

SmithKline Beecham is mulling a Pounds 2.7 billion spin-off of SB Healthcare Services, a US clinics and pharmacy management operation, as part of its planned merger with American Home Products. This move is expected to be part of a Pounds 7 billion package of disposals, mostly from AHP, as the combined business positions itself as the world's largest prescription and over-the-counter pharmaceuticals group. The merger would create a massive pharmaceuticals entity, ranking ahead of Britain's Glaxo Wellcome in drugs, and owning a range of strong consumer brands, including Beechams powders, Panadol, and Lucozade.

Key Takeaways:

  • SmithKline Beecham is considering a Pounds 2.7 billion spin-off of SB Healthcare Services, a US clinics and pharmacy management operation, as part of its planned merger with American Home Products.
  • The merger would create a massive pharmaceuticals entity, ranking ahead of Britain's Glaxo Wellcome in drugs, and owning a range of strong consumer brands, including Beechams powders, Panadol, and Lucozade.
  • SB Healthcare Services was formed last year from DPS, a pharmacy benefit manager (PBM), and SmithKline's US Clinical Laboratories, with a chequered history.
  • The merged business would sell AHP's herbicides and pesticides operation, veterinary drugs business, and the rest of its medical instruments division, worth Pounds 1.2 billion.
  • The merger also includes the disposal of certain vaccines, branded painkillers, and Effexor, AHP's anti-depressant drug, which competes directly with SmithKline's Pounds 1 billion blockbuster, Pacil/Seroxat.
  • Morale at SmithKline's headquarters in west London is described as "at rock bottom," with staff fearing huge job losses.
  • The Takeover Panel, the City's bid watchdog, will meet on Tuesday to discuss employee consultation, with Roger Lyons, general secretary of the MSF union, insisting that more information is needed from the group.

Statistics:

  • SmithKline Beecham employs 8,500 UK staff, with 1,800 based in the Brentford operation.
  • SB Healthcare Services has sales of Pounds 461 million in 1996.
  • Clinical Laboratories made profits of Pounds 85m on sales of Pounds 840m in 1996.
  • SmithKline is expected to release more information about the deal to employees on Tuesday.

Sources:

  • SmithKline Beecham (declined to comment)
  • American Home Products (no official statement)
  • Roger Lyons, general secretary of the MSF union
  • The Takeover Panel, the City's bid watchdog
  • SmithKline Beecham's 1996 annual report (no specific date mentioned)
  • The Times (no specific date mentioned)
  • The Financial Times (no specific date mentioned)

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