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SmithKline buys Block
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October 9, 2000: 8:52 a.m. ET
U.K. firm pays small premium in $1.2B bid for Sensodyne toothpaste maker
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LONDON (CNNfn) - SmithKline Beecham PLC agreed Monday to purchase Sensodyne toothpaste maker Block Drug Co. for $1.24 billion cash, strengthening the company's worldwide consumer health-care product line.
The merger values shares of Jersey City, N.J.-based Block (BLOCA: Research, Estimates), which put itself up for sale earlier this year, at $53 each, or 4.6 percent above its closing price Friday of $50.63. Block shares have been rising since last week, when reports first surfaced that SmithKline was nearing a buyout agreement.
The transaction combines Sensodyne and Block's other dental products, including Polident denture cleanser and Poli-Grip denture adhesive, with such SmithKline brands as Aquafresh and Macleans toothpaste. It also bolsters SmithKline's presence in several international markets, including Japan.
"This acquisition will significantly enhance SB's consumer healthcare business, which is a key part of our strategy for corporate growth," SmithKline CEO J.P. Garnier said. "It will add to our scale in many important markets around the world."
The company also said the transaction will add to its earnings per share immediately, although it declined to reveal by how much.
 London-based SmithKline (SB-), itself betrothed to British pharmaceutical company Glaxo Wellcome PLC (GLXO) in a merger that would form the world's largest drug company, said it already has acceptances from holders of 100 percent of Block's Class B voting shares, and from investors holding 52 percent of the non-voting stock. Block's founding family owns roughly 70 percent of the company's outstanding shares.
SmithKline said the Block deal will have no impact on its proposed merger with Glaxo. That merger has been the subject of an extended regulatory holdup that has delayed its completion.
The purchase requires regulatory approval in Europe and the United States. SmithKline will fund it from existing resources.
Block has expanded in recent years through acquisitions in such areas as cleaning products and prescription and over-the-counter medicines, but was forced to scale back and shed some units the past two years as part of an internal restructuring program.
Block earned $56.8 million in its last fiscal year on revenue of $864.3 million, up slightly from the previous year. Nearly 75 percent of the company's sales come from oral health-care products, with the remainder derived from over-the-counter medicines.
SmithKline stock fell 1.4 percent to 925.5 pence in mid-day trading on the London Stock Exchange Monday. 
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