SWISS giants Ciba-Geigy and Sandoz have startled the business world by announcing their merger giving rise to the world's second biggest pharmaceutical group and the world leader in making products for agriculture.

The huge merger in a small country is the biggest corporate merger ever worldwide, in any industry.

The new company, to be called Novartis, will have annual sales of 26 billion Swiss francs (£13.77 billion), 14 billion francs of which will be in the pharmaceutical sector. With a world market share of 4.4 per cent, Novartis will rank second in the highly fragmented sector, behind Britain's Glaxo Wellcome Group. It is depriving US group Merck of its second place ranking.

Previously, Ciba has stood ninth in the world pharmaceutical rankings and Sandoz which has a plant in Cork, 14th.

In a sector marked by cut throat competition and huge research expenditures, the two groups hope to attain a critical mass together that will ensure a rosy future. "This is a strategic response to the major changes affecting our various markets" said Ciba chairman Mr Alex Krauer, who will chair Novartis's board.

The merger, announced yesterday, will also give the two groups an opportunity to "clean house", as one market operator put it getting rid of less profitable or accessory activities.

The plan provides for Ciba to withdraw, in the next 12 months from all of its industrial and chemical activities such as textile dyes, additives, pigments and polymers.

Those divisions represent no less than nine billion Swiss francs in sales (out of 20.7 billion a year), but actually contribute very little to profits. On its part, Sandoz made the big decision last year to get completely out of the chemical sector.

The two groups' managements said the merger would result in some 10,000 jobs being cut, not including the planned disinvestments. At the end of 1994, the two groups together employed almost 145,000 people worldwide.

The Zurich stock market hailed the announcement with euphoria.

The merger must now be approved by various competition authorities, particularly in the United States and the European Union. Senior executives of the two groups said they were confident they would get the green light.