US groups make £1.5bn bid for Warner Chilcott

Click to follow
The Independent Online

Warner Chilcott, the Northern Ireland drug company which recently changed its name from Galen, is negotiating an 800p-a-share takeover by a consortium of US private equity groups.

Warner Chilcott, the Northern Ireland drug company which recently changed its name from Galen, is negotiating an 800p-a-share takeover by a consortium of US private equity groups.

The company's shares jumped 15 per cent to 747p after it admitted it had received an all-cash approach which would value the women's healthcare specialist at £1.5bn.

The board is yet to meet to discuss the offer but Roger Boissonneault, the chief executive, will step back from that discussion. He is likely to be asked to stay on to run Warner Chilcott in private hands.

It is possible that John King, the executive chairman who stands to net £118m for his 8 per cent stake, and Geoffrey Elliott, the finance director, who holds 3 per cent, would continue as non-executives.

The consortium of three private equity houses includes Blackstone, which was recently runner-up in the bidding war for Odeon cinemas and is also attempting to build a large private nursing homes business in the UK. The identities of the other two members remained unclear last night.

Warner Chilcott's products, built up through a string of acquisitions in recent years, include hormone replacement therapies, oral contraceptives and acne treatments.

Warner Chilcott was forced into an announcement after details of the talks leaked into the market and drove up the share price last week. It is the second time in the past year the company has attracted bid attention, receiving an indicative offer from Barr Laboratories, another specialist in oral contraceptives, which sent its shares up to 750p at one point.

Some analysts were speculating yesterday that Barr and others would want to look again at the company now it is "in play" as a takeover target. Shawn Manning at Dresdner Kleinwort Wasserstein said: "Counter-bids at a higher price are possible from a US branded generics player already well established in female health, such as Teva, Mylan, Barr or Watson."

The closing share price of 747p reflected scepticism over a bid war and Warner Chilcott's own warning that the bid is subject to conditions, and may finally be set at a lower price than 800p.

It is believed the Blackstone consortium is hoping to engineer a financial restructuring at Warner Chilcott and float it quickly on the US stock market, where pharmaceuticals companies are typically valued more highly than by UK investors. The company's products generate cash but their prospects for significant sales growth have been fiercely debated in the City.

Warner Chilcott considered moving its own listing to the US earlier this year in the hope of enjoying an improved valuation, but ruled out the idea because of likely resistance from its shareholders.

Galen was founded in 1968 as a contract manufacturer and research partner for other drug companies. It turned itself into a speciality pharmaceuticals company in its own right through product acquisitions and the appointment of a large US salesforce. The key moment in its transformation was the acquisition of Warner Chilcott of the US in 2000, which brought in Mr Boissonneault as chief executive.

Chairman set for £118m payout

No one was said to have been more disappointed when Barr Laboratories walked away from merger talks than Warner Chilcott'scombative executive chairman.

After 25 years with the Northern Irish drug maker, John King is widely believed to be keen to cash in his 8 per cent shareholding, which could net him £118m.

One analyst said: "He has a pad in France, a pad in Kildare and, reputedly, one of the fastest boats on the Mediterranean. Not unreasonably, he is fed up dealing with the complaints of shareholders and people like me."

Mr King has cashed in an estimated £75m from selling shares over the past few years, and is paid half of his salary by Warner Chilcott's subsidiary in Bermuda.