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Updated from 7:48 a.m. EDT

The British drug giant

SmithKline Beecham

(SBH) - Get Sally Beauty Holdings, Inc. Report

has agreed to buy

Block Drug


, the maker of Poli-Grip denture adhesives, for $1.24 billion in cash, the companies said Monday.

The deal values Block, based in Jersey City, at $53 a share, or a 4.6% premium above the company's Friday close of $50.63. SmithKline, which plans to merge with

Glaxo Wellcome


, another British pharmaceuticals company, by the end of the year, said the deal with Block would immediately add to the company's earnings.

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"This acquisition will significantly enhance SmithKline Beecham's consumer health care business, which is a key part of our strategy for corporate growth," said J.P. Garnier, SmithKline Beecham's chief executive, in a statement. "It will add to our scale in many important markets around the world and is expected to enhance earnings per share in the first full year following the completion of the transaction."

SmithKline Beecham finished Monday regular trading down $1.13, or 2%, at $66.31. Block Drug gained $1.63, or 3%, at $52.25.

Along with Poli-Grip, Block makes such dental products as Sensodyne toothpaste. SmithKline's oral care products include Aquafresh and Macleans.

"The toothpaste area has been extremely competitive over the last year to 18 months," said Nigel Barnes, an analyst at

Merrill Lynch

in London who covers SmithKline Beecham, explaining that large companies have been trying to grab market share by undercutting the prices of their competitors. "Clearly, when a major brand like Sensodyne comes on the market it makes an enormous amount of sense for a company like SmithKline to pick it up."

The deal will increase SmithKline Beecham's share of the U.S. toothpaste market from 12% to 15%, and result in cost savings because the company can immediately integrate Block's products into its vast distribution channels, Barnes said.

Barnes has a buy rating on SmithKline Beecham and his firm has done no underwriting for the company.

Block's sales through March were $864 million. This compares with $889 million in sales for SmithKline's dental products in 1999.

SmithKline said all the holders of Block's class B voting shares have approved the deal, while 52% of the owners of the company's non-voting stock have given their blessing.

The deal must still meet approval by regulators in both the U.S. and Europe. SmithKline Beecham was advised by

Lehman Brothers