pounds 14bn Zeneca bid awaited

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The Independent Online
The City is bracing itself for a pounds 14bn bid for the drugs giant Zeneca, with traders expecting the Swiss group Roche to launch a takeover as early as Monday.

Shares in the former ICI pharmaceuticals division jumped another 28p to 1,158p yesterday taking the rise over the past 10 days to 100p.

Rumours of a bid for Zeneca have circulated in the markets for weeks now but dealers believed a high level of activity in the traded options market yesterday signalled an imminent approach. Any takeover would have to be hostile as Zeneca would strongly defend its independence.

Zeneca's shares have soared over the past 12 months, rising from a low of 675p last June as Glaxo's successful pounds 9bn bid for Wellcome opened up the sector to bid speculation.

Some analysts believe Zeneca may even be preparing a defensive bid, perhaps for Fisons, to foil an approach from Roche. Fisons recently abandoned its own attempt to take over its rival Medeva.

Industry experts believe that to stand any chance of success, a predator would have to pay at least pounds 15 a share for Zeneca, valuing the group at pounds 14bn. When it was spun off from ICI in 1993, the shares were valued at 600p.

Zeneca refused to comment on the market gossip. A month ago, however, when the Stock Exchange forced a statement out of the company after a similar surge in the shares, it said: "Zeneca knows of no reason for the recent rise in its share price, other than possible investor assessment of the strength of its new product portfolio."

The company's response was cheeky but it pointed to a general view in the market that Zeneca is a particularly attractive bid target, albeit an expensive one. Unlike the Glaxo-Wellcome takeover, a Roche- Zeneca combination would be seen as a marriage of two equally strong partners.

Roche is thought to be attracted by Zeneca's expertise in cancer treatments and its low-cost production, which compares favourably with the high cost of producing drugs in Switzerland. Roche is seen as one of the few companies in the world able to afford to buy Zeneca, despite having recently spent pounds 2.7bn to acquire Syntex of the US.

A pounds 14bn takeover, if successful, would easily be the largest completed bid in the UK.

Roche has been transformed over the past few years into one of the most highly rated drugs companies in the world.

Although ranked only sixth in sales terms, the recent strength of its share price, together with the sharp appreciation of the Swiss franc, has made it the largest in market capitalisation terms with the US giant Merck.

Other companies are being forced into defensive mergers to protect ageing portfolios from the attacks of declining healthcare budgets, but Roche is thought to be about to reap the benefits of years of heavy spending on research.

Investment Column, page 21