GLAXO Wellcome and SmithKline Beecham said they had reopened merger talks to create what would be the world's biggest pharmaceutical company worth more than $180 billion (€177.5 billion).

In a brief statement, the two British drug companies - which failed to agree merger terms two years ago - said they were "in discussions which may or may not lead to a merger of equals".

Industry analysts said the deal was likely to be structured as a no-premium bid by Glaxo for its smaller rival, valuing the transaction at close to £50 billion sterling (€80.5 billion).

Glaxo's market capitalisation was £66 billion sterling at the close of trade yesterday while SmithKline was valued at £48 billion, suggesting the combined group will vie with BP Amoco, currently worth around £110 billion, for the position of largest company in Britain.