RPR set to increase offer for Fisons

TOM STEVENSON

Deputy City Editor

Rhone Poulenc Rorer was last night putting the finishing touches to a revised and final offer for Fisons. Market sources said that a bid of at least 260p a share, valuing the group at more than pounds 1.8bn, would emerge today. Fisons yesterday confirmed its rejection of the existing 240p offer launched in August.

A recommendation from the Fisons board was hanging in the balance after the British drugs group issued a statement challenging RPR to pay a price that "fully reflects the exceptional strategic value of Fisons' products, delivery technology and sales and marketing capability". In the absence of an agreement, RPR is expected to launch a dawn raid to pick up shares in the market.

Last night Stuart Wallis, Fisons' chief executive, said RPR had made no effort to negotiate an agreed offer since its original offer was rejected. He said Fisons had "a confident and certain future as an independent company" but admitted that the obstacle to an RPR takeover was simply one of price.

RPR has until tomorrow to revise its bid. Thereafter its offer cannot be changed unless a third party enters the fray. It is thought unlikely that Fisons has a white knight up its sleeve. Yesterday, the British drugs group issued a final list of questions it said RPR should answer. They cast doubt on the ability of RPR, the American arm of France's Rhone Poulenc chemicals and drugs group, to achieve its goal of becoming a major player in the asthma market without buying Fisons.

The questions also pointed to RPR's admitted weakness in Japan and its need to acquire Fisons' European sales and marketing operation. Mr Wallis highlighted Fisons' cash pile worth 50p a share, which implied an offer of just 190p a share for the core pharmaceuticals operation.

Fisons' shares closed 2p higher at 259p yesterday. Trading was relatively light with whispers of today's expected bid only emerging shortly before the market's close. If RPR succeeds in taking over Fisons at 260p, shareholders will have seen their investment more than double since Mr Wallis took over as chief executive in September last year.

After peaking at more than 500p they plunged to 108p at the beginning of this year after a string of profits warnings and run-ins with the US Food and Drug Administration brought the group almost to its knees. After a series of high level resignations following the revelation that profits had been inflated, Mr Wallis had to move fast to repair Fisons' ravaged balance sheet and reputation. In a bold series of moves he sold the research and development arm to Astra of Sweden for pounds 200m and the loss-making scientific instruments divisions for the same amount.

Mr Wallis stands to be handsomely rewarded for the remarkable turnaround. Thanks to the speed with which he patched up Fisons' finances, raising more than analysts ever expected, the company's share price has risen sharply over the past year, taking the value of share options awarded on his appointment to well over pounds 1m. Coupled with compensation for the loss of his pounds 315,000 a year salary, Mr Wallis could walk away from his year at Fisons with almost pounds 2m.

The bid for Fisons is the latest in a string of takeovers in the pharmaceuticals sector over the past two years during which fast increasing pricing pressures and the soaring costs of developing drugs has forced a consolidation of the industry worldwide.

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