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. Last Updated: 07/27/2016

$67Bln Europe Drug Merger Sealed




LONDON -- Europe's largest ever merger was announced Wednesday, combining British drug major Zeneca Group PLC and Swedish counterpart Astra AB in a stock swap deal to create a pharmaceuticals giant with market capitalization of $67 billion.


The two firms said they had agreed an all-share merger of equals to form London-based AstraZeneca, in which Zeneca shareholders will hold 53.5 percent.


The merger is a "perfect fit," said Tom McKillop, head of Zeneca's pharmaceuticals business and the man tapped to head AstraZeneca.


"We believe that having known each other for many years and having worked together for weeks and indeed months that this will be a winning combination," he told reporters in a telephone conference call.


The driving force behind the merger was the tremendous step up in global sales and marketing power and reach that would be achieved, he said.


The merger, linking the makers of two of the world's best known drugs in Astra's blockbuster ulcer pill Losec and Zeneca's cancer treatment tamoxifen, ends years of speculation about the future of the two groups.


It follows the disclosure that Hoechst and Rhone Poulenc are to merge their life-science units to form Aventis, and last week's news of an all-French merger between Sanofi and Synthelabo.


AstraZeneca will be No. 3 in the world in prescription drug sales, with the No. 2 slot in Europe andranking seventh in the United States.


The two companies said in a joint statement that yearly pretax cost savings would be $1.1 billion within three years and that restructuring - involving a one-off cost of $1.2 billion - would cut some 6,000 jobs worldwide.


Swedish industry magnate Percy Barnevik has been nominated chairman, McKillop chief executive and Zeneca's Sir David Barnes and Astra's Hakan Mogren deputy chairmen in the new group.


AstraZeneca would have had pro forma 1997 pharmaceutical sales of $11.5 billion, total sales of $15.9 billion and pre-tax profit of $3.5 billion. Combined research and development investment is more than $1.9 billion.


Shares in both companies rose on the news as analysts applauded the move.


"This merger makes perfect sense because Astra and Zeneca are of comparable size, are strongly research driven and need critical mass," said Hemant Shah, an independent U.S. pharmaceuticals analyst.


Zeneca's drug sales of just over $4 billion last year had been seen as insufficient in an industry where the size of research and marketing budgets are increasingly important.


Astra has been a victim of its own success, with markets fearful that it had nothing to fill the enormous potential gap in its profits when patents on Losec, currently the world's best-selling drug, begin to expire from 2001. Sales of the drug, sold in the U.S. as Prilosec, are forecast to reach $6 billion in 2001.