GlaxoSmithKline Merger

Abstract

All the major pharma companies in the world have grown through mergers and acquisitions. The antecedents of GlaxoSmithKline include Glaxo, Wellcome, SmithKline French, and Beecham. Glaxo and Wellcome had merged to create synergies in research and development. The merger of Beecham and SmithKline in the year 1989 sparked a wave of mergers between pharmaceutical mergers in the next decade. Glaxo Wellcome group was formed due to the merger between Glaxo and Burroughs Wellcome & Company. The merger between Glaxo Wellcome and SmithKline created the world’s largest pharmaceutical company, and the combined company became the third largest corporation in the world. The merger resulted in economies of scale, complementary portfolios, operational synergies, and cost savings. Glaxo Wellcome shareholders received approximately 58.75% of the issued ordinary share capital of GlaxoSmithKline, and SmithKline Beecham shareholders received approximately 41.25% of the issued ordinary share capital of GlaxoSmithKline. The merger helped the combined firm to achieve economies of scale in the pharmaceutical sector. GlaxoSmithKline Beecham (GSK) became the largest pharmaceutical company in the world. GSK became the world’s largest producer of prescription drugs with market share of more than 7%. The merger also facilitated avoidance of increased R&D costs. The merger enhanced the complementary portfolio of the two pharmaceutical companies. The combination of Glaxo Wellcome’s respiratory therapeutic segment with SmithKline Beecham’s strength in vaccines and arthritis broadened the portfolio of offerings. The cumulative returns for GSK during the 251 days’ merger window period (−10 to 240 days) were 8.93%.