Takeover Talk Spurs Stock of SmithKline

PHILADELPHIA — Rumors that SmithKline Beckman Corp. is about to become a takeover candidate have swirled around the big pharmaceutical company, jacking up the price of its stock substantially.

“I am taking it (buyout speculation) seriously,” said Kidder Peabody analyst Stephen Buell, noting that more than 10 million SmithKline shares have traded in the past week. “The adage that wins out most often is ‘where there is smoke, there is fire.’ ”

SmithKline’s stock, which is up about $5 a share from last week, fell $2.25 to $50.25 Friday after Ciba-Geigy AG, one of the rumored suitors, issued a statement from Zurich, Switzerland, denying that it was building a stake in SmithKline.

Provident National Bank drug analyst Rita Freedman said Philadelphia-based SmithKline was especially attractive as a breakup candidate because its parts were worth more than the whole.

Among those parts are two subsidiaries based in Orange County--Beckman Instruments and Allergan--and a clinical laboratory in Van Nuys.

Beckman Instruments, headquartered in Fullerton, is a major manufacturer of medical diagnostic and life science laboratory instruments. Last year, it earned $30.2 million on $691 million in sales. The company has 7,000 employees worldwide, including 2,300 at plants in Fullerton and Brea.

Van Nuys Facility

Allergan, an Irvine-based manufacturer of eye products, projects $750 million in sales for 1988. Allergan has 6,000 employees worldwide, including 2,000 at facilities in Irvine, Santa Ana and Tustin.

Another SmithKline Beckman subsidiary, SmithKline BioScience, has a clinical laboratory in Van Nuys with about 1,000 employees.

The New York Stock Exchange said SmithKline was asked to comment on the unusual market activity in the company’s stock on Thursday when the stock rose $4.50 a share. But the company refused, citing its policy of not commenting on unusual market activity or rumors as the reason for its silence.

Analysts said some potential bidders could be put off by SmithKline’s fairly hefty price tag, which they estimated at $65 to $85 a share, or up to $10 billion.

SmithKline’s major businesses are pharmaceuticals, which account for most of its revenues, 84% owned medical instruments maker Beckman Instruments Ins., wholly owned eye- and skin-care company Allergan Inc., animal health products and clinical laboratories.

“That is a huge bet,” S. G. Warburg analyst Samuel Isaly said. “It is expensive in the total amount of cash required.”

Isaly said SmithKline’s problems in finding a replacement for its fading drug products Tagamet and Dyazide present a formidable challenge to a potential acquirer.