NEWS OF THE WEEK
CHEMICAL ACQUISITIONS: Sterling fights to remain independent Sterling Drug has fired three major salvos at its would-be acquirer, Hoffmann-La Roche, in a bid to remain independent. But, undaunted, the Swiss-based pharmaceuticals manufacturer has raised its bid to $81 a share, or nearly $4.8 billion for the 59 million shares outstanding. Sterling Drug's defense tactics, designed to make the company too expensive for takeover, were revealed in documents filed with the Securities & Exchange Commission. The documents show that the U.S. firm has established a $2 billion credit line, a r r a n g e d severance agreements with key executives, and structured a fee schedule with its investment banker, Morgan Stanley. This schedule would make it more lucrative for that banker to arrange a bid in excess of $80 per share for Sterling from a suitor or keep Sterling independent. Those actions follow closely on the heels of Sterling's initial rejection of Roche's $4.2 billion, or $72 a share, bid. The day after Sterling rejected Roche's offer and filed its statement with SEC, Roche indicated it would not just walk away and increased its offer to $76 a share, or nearly $4.5 billion. Two days later, Roche raised its bid to the current level of almost $4.8 billion. Sterling has given every indication that it prefers its independence, despite Roche's tenacious pursuit. Sterling chairman John M. Pietruski called Roche's first offer "grossly inadequate from a financial point of view," and added that "the board of directors has determined to pursue vigorously the lawsuit commenced against Roche." That suit alleges that Roche falsified information to hide profit and avoid taxes, and also charges that the Swiss firm failed to disclose details about 4
January 25, 1988 C&EN
Pietruski: vigorously pursue lawsuit Roche, thereby breaking U.S. insider trading laws. Sterling's SEC filing shows that it has arranged for a $2 billion revolving credit agreement with an u n n a m e d New York bank (not Morgan Stanley). The money could be used for any number of purposes, says the filing, which, significantly enough, includes possible acquisitions, repurchases of its own stock, or the issuance of extraordinary dividends. Though the company did not elaborate further in its filing, all those tactics have been used by other companies in the past to make themselves more costly and therefore less attractive to an aggressive acquirer. The filing also revealed a second tactical weapon Sterling might use in its defense: severance agreements, k n o w n as " g o l d e n p a r a c h u t e s " worth up to $47 million for 68 key employees in the event of a takeover. A third tactical weapon was the
disclosure that Sterling has an agreement with Morgan Stanley, designed to further secure its independence in the event of a takeover attempt. The agreement calls for Sterling to pay its investment banker a total of $10 million "in the event that the Roche offer does not result in the acquisition of the company within six months from Jan. 5, 1988, and the independence of the company is not imminently threatened at that time." The agreement with Morgan Stanley further provides that the banker receive $15.2 million plus $1.4 million for each dollar-per-share offer above $80 should Roche or any other acquirer succeed in a takeover. If successful, the plan would make the company more expensive to a potential acquirer. Sterling had no comment at press time on the $81-a-share offer from Roche. Sterling's next move is therefore unknown. Roche's success depends on receiving a majority of shares from present shareholders, the latest offer to whom expires Feb. 3. Marc Reisch, New York
Robins accepts bid from American Home Forced by shareholders to reverse its decision to accept a takeover bid made by the French pharmaceutical firm Sanofi, the board of directors for bankrupt A. H. Robins has accepted what the board thinks is an even better bid from American Home Products. Robins is in the midst of bankruptcy proceedings in U.S. District Court in Richmond, Va., stemming from suits filed by thousands of women claiming injury from using
