SMITHKLINE STOCK REPURCHASE COULD COST $1.4 BIL

Executive Summary

SMITHKLINE STOCK REPURCHASE COULD COST $1.4 BIL. under a "Dutch Auction" tender offer announced by the company on Nov. 26. If all 15 mil. shares are tendered, SmithKline would also reduce its total 76 mil. outstanding shares by almost 20%. Under the program, the company is offering to purchase between 5 mil. and 15 mil. of its common shares at a price between $86 and $96 a share. Participating shareholders must designate a price within that range where they are willing to sell. SmithKline, after reviewing the bids, will then establish a sriking price at or below which the firm will purchase all tendered shares. SmithKline said that it is currently negotiating a line of credit from several banks to finance the buyback. At a minimum, the tender offer will cost $430 mil. "This special program is a natural continuation of the purchase of SmithKline Beckman shares that we have been conducting since January 1984," Chief Executive Henry Wendt stated. To date, the company has purchased almost 9 mil. of its own shares, according to the release. "The tender offer supplements other activities and investments by the company to ensure growth of the business over time," Wendt added. "It does not foreclose the option to stimulate growth." SmithKline said it hopes to complete the purchase program in 1986 so that that shareholders can take advantage of the favorable tax treatment of capital gains in effect through the end of the year. In the same release, the company estimated its 1986 sales at $3.7 bil. and net earnings per share, based on an average number of 77 mil. outstanding shares, at between $6.25 and $6.80. SmithKline noted that earnings per share were reduced by 37› as a result of the firm's early retirement program and the cost of the Contac capsule withdrawal.