Dollars 8.5bn Cyanamid bid threatens SmithKline deal

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The Independent Online
US pharmaceuticals and medical supplies company American Home Products stunned Wall Street last night with an dollars 8.5bn ( pounds 5.5bn) takeover bid for American Cyanamid, the drug, pesticide and medical products group.

The cash offer is priced at dollars 95 per share, a 50 per cent premium over Cyanamid's share price of dollars 63.75 late Tuesday, before trading in its shares was suspended pending the announcement.

The move came amid market speculation that SmithKline Beecham was on the verge of agreeing an asset swap with Cyanamid, under which SmithKline would receive prescription drug and consumer brand businesses in return for transferring its vaccine and animal health businesses to Cyanamid.

SmithKline recently acquired Diversified Pharmaceutical Services, the pharmacy benefit manager, and is looking for additional drug products to channel through its expanded distribution network.

The surprise bid from American Home Products, which like its target is based in New Jersey, would push the rumoured SmithKline asset swap aside, and create one of the world's most powerful medical and agricultural products groups.

American Home Products said its offer was subject to 'there being no significant asset sales or other transactions by American Cyanamid prior to closing'.

It said it was sending a letter to Cyanamid's chairman to inform him of the offer and would be holding a special board meeting on 16 August to secure formal board approval for the offer.

Analysts said it would be hard for the American Cyanamid board to reject a bid pitched at 50 per cent premium to its pre-offer share price, but were nevertheless unsurprised by the size of the premium, given the current takeover mania in the healthcare sector. 'You have to pay a premium of 50 per cent and up,' said David Saks, healthcare stocks analyst at Gruntal Financial Corporation, the brokers.

The move by American Home Products sent healthcare stocks higher in the final minutes of trading on the New York Stock Exchange. Traders feel that the restructuring in the healthcare industry is speeding up, as healthcare companies position themselves to face the shift towards managed care and pricing pressures.