Rhone-Poulenc makes pounds 1.7bn hostile bid for Fisons
Saturday 19 August 1995
The move hit the stock market out of the blue, despite the bid rumours which have swirled round Fisons for months, and the shares were sent soaring 71.5p to 264.5p - well ahead of the 240p-a-share offer terms.
It came amidst speculation on Wall Street yesterday that an pounds 8bn tie- up between the US pharmaceutical group Upjohn and Sweden's Pharmacia was in the offing.
Fisons' chief executive, Stuart Wallis, almost immediately rejected RPR's 240p-a-share offer, claiming it seriously undervalued the group. "Obviously there is a price, as there is with any company, which is right and sensible for shareholders: 240p very definitely isn't it," he said yesterday.
Some analysts said they expected a white knight rescuer to emerge, with one suggestion that an offer up to 300p might be justified. Others, however, said RPR was offering a full price and queried why another bidder would appear at this late stage of Fisons' recovery from several years of difficulties.
The bid is worth less than half the 511p Fisons' shares hit in 1991, just before the company's fall from grace, precipitated by criticisms of production arrangements by the US Food and Drug Administration, but well over double the recent low of 107p earlier this year. If the deal goes through, it will propel Rhone-Poulenc Rorer from the 14th- to the 10th- or 11th-largest drug group and put it in number four position in terms of asthma allergy products, Fisons' main area of strength.
The two sides have known each other since at least 1992, when they signed a co-promotion agreement for Fisons' Tilade and RPR's Azmacort anti-asthma drugs. Directors of the companies met three times during the past week without reaching agreement on terms, but RPR said it would continue to seek a recommendation from the Fisons' board. Michel de Rosen, the president and chief executive who was involved in the talks with Mr Wallis, said: "We believe this is a full and fair offer to shareholders which he could recommend to the board, but frankly he hasn't seen the light."
He attacked Mr Wallis's strategy of selling off Fisons' research and development operations, which went to Astra of Sweden earlier this year for pounds 202m. Mr De Rosen said this was highly risky for shareholders, leaving the group without new products for the future.
Fisons is heavily dependent on Intal, an anti-asthma drug launched in 1968, which represented pounds 205m of the group's pounds 334m turnover in asthma and allergy products last year. Sales had started to edge down after its nebulised form went off patent last year, Mr De Rosen said, while Tilade, which was meant to be Intal's replacement, had been "a significant disappointment". Sales, which were pounds 52m last year, were growing, but not at the rate hoped when some analysts had forecast they could reach $1bn.
"They have no pipeline today to offset the Intal decline and they have no pipeline in future because they have sold the R&D to Astra, " Mr De Rosen said. Meanwhile, Mr Wallis would find it more difficult than he thinks to buy in drugs or companies to occupy Fisons' marketing network. The competition for suitable products was intense, he said.
RPR, which has strengths in treatments for cardiovascular diseases, wants to build critical mass in the $9bn anti-asthma market, the fifth-biggest in the pharmaceutical area.
Mr De Rosen said growth had been around 10 to 12 per cent per annum in recent years and they were forecasting 8 per cent going forward, compared with 5 to 6 per cent for pharmaceuticals as a whole.
Fisons would bring marketing expertise in Europe, where it has an agreement to market RPR drugs, including Kestin, a new formulation about to be launched. Adding Fisons' business to RPR's Azmacort, the leading inhaled steroid for asthma in the US, would give it a full range of treatments, Mr De Rosen said, as well an interesting new technology in the new generation of dry powder inhalers.
The exit multiple on the deal is around 24 times the consensus of analysts' earnings forecasts for 1995, based on profits of around pounds 103m. But the multiple falls into the high teens when account is taken of current proposals to sell the laboratory supplies and scientific instruments businesses.
Comment, page 17
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