Drug Maker Launches Hostile Bid For British Rival Rhone-Poulenc Offers $2.6 Billion For Fisons

Rhone-Poulenc Rorer Inc. is giving one of its competitors a Maalox moment.

Rhone, creator of the popular antacid, launched a $2.6 billion hostile takeover bid Friday for the British drug maker Fisons PLC.

Rhone said the two would make a good fit, offering a wide range of drugs to treat asthma and allergies with a stronger geographic presence.

Fisons’ leader rejected the offer despite the fact that it is 24 percent higher than Thursday’s closing price of his company’s stock.

Chief executive Stuart Wallis called the bid too low. He urged Fisons shareholders to keep their company independent and stick with an ongoing restructuring that is reversing deep troubles of the early 1990s.

Stock traders bet the bidding will go higher than Rhone’s offer of 240 pence, or $3.72, for each Fisons share. Fisons rallied sharply on the London Stock Exchange, ending the day at 264.5 pence per share, up 37 percent.

However, the credit rating group Standard & Poor’s Corp. criticized the deal. S&P questioned its benefits for Rhone-Poulenc Rorer and said it would unduly boost the already high debt level of its parent company, the French chemical and drug maker Rhone-Poulenc SA.

The deal would represent a further consolidation in the pharmaceutical industry. Big drug makers have been growing through acquisitions to gain more clout with cost-conscious customers such as U.S. health maintenance organizations and other managed care providers.

The industry’s biggest deal yet occurred earlier this year in Britain, when Glaxo PLC bought Wellcome PLC for $15 billion, making the combined Glaxo Wellcome PLC the world’s top drug maker.

Friday’s bid came amid a transitional period for both companies.

Rhone-Poulenc Rorer, based in Collegeville, Pa., is 68 percent owned by Rhone-Poulenc. Besides Maalox, the asthma drug Azmacort and the allergy drug Nasacort are among RPR’s major products.

However, sales declines prompted RPR last year to sell off the North American rights to its over-the-counter drug business, including Maalox, to the Swiss drug company CibaGeigy Ltd. RPR is in the midst of a restructuring that contributed to a 17 percent drop in 1994 profits to $351 million on $4.17 billion in sales.

Fisons is also in a restructuring. The company divested much of its research operations last year and is in the midst of selling nonpharmaceutical businesses.

Rhone-Poulenc Rorer said Fisons is well established in the respiratory drug market, especially for treating asthma, but its major drug, Intal, is suffering from shrinking sales and faces more competition from generic copies.

Rhone-Poulenc Rorer Chairman Robert E. Cawthorn said his company had met several times with Fisons in hopes of gaining an agreed bid. “Our full cash offer represents a significantly better alternative for Fisons shareholders than Fisons’ uncertain future as an independent company,” Cawthorn said.

S&P analyst Christian Wenk said Friday Fisons was fraught with operational problems in the early 1990s, but has largely been restored to health by Wallis.

It was cited by the U.S. Food and Drug Administration for unsafe production methods in 1992, prompting it to withdraw its popular eye medication Opticrom from the U.S. market, he said.

Fisons profits began slipping and the company engaged in a controversial strategy, known as trade-loading, or selling large quantities of drugs at a cheap price late in the year - rather than early the following year - to prop up the annual results.