King Pharmaceuticals has increased its bid to acquire Alpharma but has chosen to take the hostile route after its initial offer was firmly rejected by the board.
Last month, King made a $33 per share offer for Alpharma, representing a 37% premium over its closing price on August 21 and valuing the firm at around $1.4 billion. It had initially approached the latter in July, and had made three non-binding acquisition proposals, all of which were dismissed as inadequate.
King has now come back with a $37 per share cash bid, valuing Alpharma at $1.6 billion, and a 54% premium over the closing price on August 21. However, this too has been rejected so King’s chief executive Brian Markison says “we have determined it is necessary to take our enhanced offer directly to Alpharma stockholders in order to deliver significant value to them as expeditiously as possible”.
In a letter to his counterpart Dean Mitchell, Mr Markison says he is “disappointed that you and your board of directors have rejected our enhanced offer”. He adds that he has attempted to engage them “in a substantive discussion of the merits of a negotiated business combination between King and Alpharma” since early July, “without result”.
Mr Markison added that the $37 per share bid contained a ‘go-shop’ provision whereby Alpharma “would be permitted, after signing, to actively solicit third-party offers during an agreed-upon period of time. You have also declined this offer”. Therefore, “while we would prefer to work cooperatively with you…to complete a negotiated transaction”, King’s board has authorised management to commence a tender offer to purchase all of the outstanding shares of Class A common stock of Alpharma for $37 per share, “which we intend to do promptly”.
King is looking to expand its portfolio, which was hit hard by the loss of patent protection last year on the blockbuster hypertension drug Altace (ramipril), hence its interest in Alpharma. Over half of the latter’s revenues come from animal health products but its drugs side is pretty healthy too.
In the second quarter, Alpharma’s pharmaceutical sales rose 91% to $81.3 million, driven by Kadian (extended-release morphine) and the recently-launched Flector (diclofenac/epolamine) topical patch. In the same quarter, King posted turnover of $397 million, down 26.9% on the like, year-earlier period.
Alpharma has yet to respond to King’s move.
