Glaxo on S&PWatch Pos; SmithKline Still on Watch.LONDON--(BUSINESS WIRE)--Feb. 2, 1998--Standard & Poor's CreditWire 2/2/98--Standard & Poor's today placed its double-'A' long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. corporate credit rating and senior unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. ratings of Glaxo Wellcome PLC (GW) on CreditWatch with positive implications. About US$2 billion of rated debt is affected. At the same time, SmithKline Beecham PLC (SB) and related entities' double-'A'-minus long-term corporate credit and senior unsecured ratings remain on CreditWatch with positive implications, where they were placed Jan. 20, 1998. Additionally, Standard & Poor's affirms both groups' and related entities' 'A-1'-plus short-term corporate credit and commercial paper ratings. This follows GW's and SB's announcement that they are in discussions with a view to merging the two companies. The proposed transaction is structured as a merger of equals based on an exchange of shares. The CreditWatch listing, with positive implications, reflects a significant improvement in the combined group's business position in conjunction with the conservative financing of the proposed transaction. The CreditWatch listing also assumes that there will be no special dividend, and ultimate ratings will depend on various approvals including the European Commission European Commission, branch of the governing body of the European Union (EU) invested with executive and some legislative powers. Located in Brussels, Belgium, it was founded in 1967 when the three treaty organizations comprising what was then the European Community and clearance from the U.S. Federal Trade Commission, which may or may not lead to material divestments. From a business risk perspective the merger: -- Combines two superior players in industries with generally favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. risk characteristics (as evidenced by both GW and SB individually already holding Standard & Poor's highest commercial paper rating, 'A-1'-plus, prior to the transaction); -- Gives the combined group the leading position globally in pharmaceuticals, with a market share of about 7%, being over 50% bigger than the number two in the industry; and -- Improves its business position through a larger portfolio of ethical drugs, better therapeutic coverage, and improved critical mass in terms of marketing and R&D effort. Thus, the combined group would be better prepared to meet the challenges such as healthcare reforms facing the pharmaceuticals industry. From a financial risk perspective, in contrast to most mergers in the industry with the exception of Pharmacia AB's merger with The Upjohn Company and the Novartis AG Novartis AG Swiss pharmaceutical company. It was formed through the 1996 merger of two Swiss firms: Ciba (see Ciba-Geigy) and Sandoz, a chemical company with interests in pharmaceuticals, nutrition, and agriculture. merger, the conservative all-paper financing of the transaction does not impair im·pair tr.v. im·paired, im·pair·ing, im·pairs To cause to diminish, as in strength, value, or quality: an injury that impaired my hearing; a severe storm impairing communications. the combined group's already strong financial position. Both group's funds from operations Funds From Operations (FFO) Used by real estate and other investment trusts to define the cash flow from trust operations; earnings with depreciation and amortization added back. individually more than covered net debt in the past financial year. Furthermore, both group's superior cash-generating ability and financial position, continuation of a conservative track record regarding financial policies, merger synergies, and cost-cutting potential, should enable the combined group to maintain or improve its superior ratings, despite its role as a consolidator in a still fragmented frag·ment n. 1. A small part broken off or detached. 2. An incomplete or isolated portion; a bit: overheard fragments of their conversation; extant fragments of an old manuscript. 3. industry, Standard & Poor's said. -- CreditWire CONTACT: Christian Wenk, London (44) 171-826-3511 David Lugg, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of (1) 212-208-1348 For more information on criteria or subscriptions: http://www.ratings.standardpoor.com |
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