NEW YORK (Reuters) - King Pharmaceuticals Inc KG.N raised its offer for Alpharma Inc (ALO.N) on Thursday to about $1.6 billion, and said it would take the offer directly to shareholders.
Alpharma urged shareholders to take no action with respect to the hostile offer until its board makes a recommendation. It also said it is exploring strategic options, including a possible sale of the company, in light of King’s revised proposal and interest from other parties.
Alpharma shares rose 4.7 percent — above King’s new offer price — while King shares fell 4 percent.
King boosted its offer to $37 per share from its previous bid of $33 per share, an increase of 12 percent. The new offer represents a 54 percent premium for Alpharma shares from the day before King’s initial offer became public last month.
King wants to acquire Alpharma to boost its pain management franchise and to diversify with Alpharma’s animal health business.
Alpharma had determined the original $33-a-share offer was not in the best interest of shareholders, and Natixis Bleichroeder analyst Corey Davis said Alpharma would probably still hold out for more.
“While we appreciate King’s commitment to not ‘overpay’ for Alpharma, it may have to go a smidge higher in its offer,” Davis said in a note to clients. “This does not bother us and we are quickly warming up to King on the chances it is able to acquire a pipeline with Alpharma.”
Bristol, Tennessee-based King said it intends to start a cash tender offer to acquire all of the outstanding shares of Alpharma’s Class A common stock.
“We have determined it is necessary to take our enhanced offer directly to Alpharma stockholders in order to deliver significant value to them as expeditiously as possible,” King Chief Executive Officer Brian Markison said in a statement.
Alpharma said its board would make a recommendation to shareholders within 10 business days following the commencement of the tender offer.
Alpharma CEO Dean Mitchell said King communicated its revised proposal last week, and Alpharma invited King “to enter into a process designed to ensure Alpharma shareholders receive full and fair value for their investment in our company.”
Alpharma shares closed on Wednesday at $35.73, well above King’s initial offer price, as analysts have been anticipating a higher offer from King or another bidder. They rose to $1.67 to $37.40 in afternoon trading on the New York Stock Exchange.
In a letter to Alpharma released to the public, Markison said in its latest offer King stated it would enter into a merger agreement containing a “go-shop” provision, under which Alpharma would be permitted, after signing, to actively solicit third-party offers during an agreed-upon period of time. But Alpharma declined that offer, Markison said.
King, whose shares were down 45 cents to $10.80 in afternoon trading, said it expected the transaction would add to earnings per share in the second year following its completion.
Reporting by Lewis Krauskopf, editing by Gerald E. McCormick and Gunna Dickson