Galen chief sold £5m share stake a day before bid talks collapsed

Allen McClay, the multimillionaire founder of Galen, sold £5m of shares in the Northern Irish drug maker on Friday, before the company lost 16 per cent of its value on the stock market yesterday morning.

The company said takeover talks, understood to be with Barr Laboratories of the US, had collapsed.

Mr McClay netted £4.97m when he sold 700,000 shares at 710.5p apiece on Friday - a transaction that was revealed yesterday just two hours after Galen said Barr had walked away. Barr's shares had been hit hard by speculation it could be about to pay up to £1.5bn for the female health specialist.

The ebullient Mr McClay is one of Northern Ireland's most famous business figures, with a fortune recently estimated at £178m. He denied any prior knowledge of the end to Galen's takeover talks.

He said: "In fact, I thought it was a done deal. People were talking about the shares going over £8, but I thought that a bird in the hand is worth two in the bush."

He added he had not previously heard the rumours of a bid, which prompted Galen to announce, last Thursday, that it was in talks. "Nobody approached me or even whispered it to me," he said.

Mr McClay retired as non-executive president of Galen in 2001, 33 years after founding the company and having overseen its growth from a business providing manufacturing and laboratory services to drug makers to a specialist pharmaceuticals company in its own right. Galen has since sold the original manufacturing and lab services businesses to Mr McClay for £90m. He says he "bought a chemistry set to keep me busy in my retirement".

Mr McClay has sold Galen shares worth more than £133m in the past four years and used them to fund the private businesses. Of Friday's transaction, he said: "I needed the money, it's as simple as that. I'm building new laboratories which should be open on 1 September. They've cost £25m and I needed a few shekels for that."

Galen shares collapsed 110p to 595p yesterday after a terse statement saying the preliminary discussions revealed last week have since been terminated. Sources at the companies insisted the break-up of talks was amicable, arguing that they had begun some weeks ago when the Galen share price was close to 450p. They were 633.5p before news of the talks broke.

New Jersey-based Barr, by contrast, had seen its shares fall by more than 10 per cent as shareholders feared it would overpay for Galen, which made profits of £101m last year. Barr shares rebounded strongly in early New York trading on news the talks were off. Neither company would comment.

Although some analysts said Galen remained in play as a takeover target, most poured cold water on speculation that other bidders for Galen might emerge. "Barr was by far the most likely bidder," one said, while others pointed out that other rumoured suitors - including Akzo Nobel of the Netherlands and Germany's Schering - had internal problems that may prevent them bidding. Johnson & Johnson, the US giant, may be barred on competition grounds, they said.

Galen's portfolio of products in hormone replacement therapy and oral contraception would have been complementary to Barr's own business.