Merger

Glaxo wellcome and Smithkline Beecham

Merger between SmithKline Beecham and Glaxo Wellcome. Glaxo Wellcome, a UK based
pharmaceutical company, was engaged to produce pharmaceutical products for curing two main
diseases namely asthma and HIV/Aids. It was the third-largest pharmaceutical company by
revenues in 1991. Around 4 cent of market share of this industry was obtained by Glaxo
Wellcome. On the other hand, SmithKline Beecham was also UK based company and engaged to
produce medicines globally. In the year 2000, a merger between SmithKline Beecham and Glaxo
Wellcome took place in the UK. This transaction renamed both companies in GlaxoSmithKline.
Although the companies are calling it a merger of equals. The combined company, to be called
Glaxo SmithKline, would hold a 7.3 percent share of the global pharmaceutical market and have
a combined market value of about $177 billion (108 billion pounds), based on Monday's closing
stock prices in London.

A short history
• In 1989, SmithKline Beckman and The Beecham Group plc merge to form SmithKline
Beecham plc.
• In 1994, SmithKline Beecham acquires Diversified Pharmaceutical Services Inc., a
pharmaceutical benefits manager, and Sterling Health. This makes SmithKline Beecham the
third-largest over-the-counter medicines company in the world and number one in Europe and
the international markets. Focusing on human healthcare, SmithKline Beecham sells its animal
health business.
• In 1995, Glaxo and Wellcome merge to form Glaxo Wellcome. Glaxo Wellcome acquires
California-based Affymax, a leader in the field of combinatorial chemistry
• In 2000, GlaxoSmithKline is formed through the merger of Glaxo Wellcome and SmithKline
Beecham.

Strategic Objectives:
There were six reasons which compelled both the legendary companies to go for the merge and
to build a leading company in the entire pharmaceutical industry. The reasons for merging up
together were:

 To reduce the Research & Development pipeline.

 To reduce the Research & Development cost.

 Drug reimbursement issues.

  Political pressures and growing concerns over drug prices.

 Patent expirations / Generic competition.

 Recent developments in biotechnology and the mapping of the human genome.

Transaction Structure
GW and SB were acquired by a newly formed English holding company, GlaxoSmithKline, by
means of a scheme of arrangement of each of GW and SB. Under the scheme GW and SB shares
were cancelled in return for the issue of GlaxoSmithKline shares to the former public
shareholders in those two companies
GlaxoSmithKline shares issued. In consideration for the cancellation of the shares and the issue
of new GW and SB shares to GlaxoSmithKline, GW shareholders and SB shareholders who
were on the companies’ respective share registers at the scheme record time they received fully
paid GlaxoSmithKline shares on the basis of one GlaxoSmithKline share for each GW share and
0.46 (approx) GlaxoSmithKline shares for each SB share. It is actually a stock swap.
 Terms of the deal

 Glaxo investors will own 58.75 percent of the combined company, swapping their shares
on a 1-for-1 basis. Glaxo shareholders will control a majority of the new company.
 SmithKline shareholders will own 41.25 percent of the new company. They will receive
0.4552 share in the new company for each of their SmithKline shares.