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LONDON -- The boards of British pharmaceutical giants

Glaxo Wellcome



SmithKline Beecham

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announced on Monday morning that they have unanimously agreed to the terms of a merger to create one of the world's largest pharmaceutical companies with an estimated 7.3% share of the global pharmaceutical market and a combined market capitalization of $189 billion, according to the press release.

The companies confirmed on Friday that after a two-year hiatus they had renewed the merger discussions, which were abandoned after Glaxo Executive Chairman Richard Sykes and SmithKline Chief Executive Jan Leschly failed to agree on who should run the company.

At 13:00 GMT, Glaxo was down 3.5% at 1755 pence and SmithKline was down 7.1% at 786.5 pence, mostly on profit-taking after the companies rose 4.5% and 7.1% respectively on Friday following the news that the talks were back on.

When the merger is completed by the summer, Glaxo shareholders will hold approximately 58.75% of the new entity -- to be called Glaxo SmithKline -- and SmithKline shareholders will hold approximately 41.25%

The company says it envisages $1.7 billion in annual pretax cost savings from the third anniversary of completion, of which $415 million will be reinvested in R&D. Analysts say most of these savings will come from staff layoffs.

Part of the reason why the two companies have managed to consummate the marriage this time around is because Leschly is retiring in April, while Sykes is due to retire in 2002.