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SMITHKLINE EYEING POTENTIAL ACQUISITIONS WORTH APROXIMATELY $250 MIL.

Executive Summary

SMITHKLINE EYEING POTENTIAL ACQUISITIONS WORTH APROXIMATELY $250 MIL., the company reported in its recently announced "Dutch auction" tender offer ("The Pink Sheet" Dec. 1, T&G 3). SimithKline said in the stock repurchase offer to shareholders that it is "presently engaged in discussion with several parties reating to strategic acquisitions or other arrangements in areas complementary to the company's existing business." The merger discussions, SmithKline said, "may result in one or more transactions in December 1986 or in 198m with aggregate payments approximating $250 mil." SmithKline is known to have been in the market for an ophthalmic business. In October 1984, the company's effort to acquire National Patent's contact lens subsidiary, International Hydron, fell through. SmithKline's offer valued the company at approximately $155 mil. An eyecare business would represent an obvious synergy with SmithKline's fast growth Allergan business. Another of the company's faster growing segments is its clinical labs division, where further expansion could come through several smaller acquisitions. Providing impetus to the growth of SmithKline's business in that area was the company's acquisition in 1981 of Upjohn's entire clinical labs business and a joint-venture agreement with American Hospital Supply in 1984 that set up SmithKline BioScience. SmithKline has an option to buyout the minority position by 1990. The tender offer for SmithKline's stock repurchase plan indicates that the company will not be using its cash reserves for the "Dutch auction". Instead, SmithKline has lined up $600 mil. in debt from Citibank and another $1.5 bil. from a syndicate of banks for "general corporate purposes" including the stock repurchase program.
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