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Rumor of ICN Takeover Bid Boosts Rorer Group’s Stock

Times Staff Writer

Acting on rumors of a takeover bid by Costa Mesa-based ICN Pharmaceuticals Inc., speculators boosted shares of the Rorer Group Inc. by $3.875 Wednesday to a closing price on the New York Stock Exchange at $43.75 a share.

With more than 3.5 million shares traded, the Fort Washington, Penn., drug firm was the Big Board’s third-most active issue Wednesday.

Securities analysts said a merger could be possible, given recent statements by ICN that it plans to make a major acquisition. However, officials of both companies refused to comment on the rumor--apparently triggered by the sale early Wednesday of a block of 2 million Rorer shares held by the Dow Chemical Co. The sale represented about 9% of Rorer’s outstanding shares.

Most of the stock--more than 1.9 million shares--reportedly were purchased for $39.50 a share by Michael Steinhardt, a New York stock trader. Steinhardt’s shares appreciated more than $8 million during the day’s trading.

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Dow said in a prepared statement that the sale was “part of the normal management” of its investments but that purchasers agreed to pay an additional amount should Rorer be acquired within the next year for more than $43 a share.

A Dow spokesman Wednesday was unaware of the rumored acquisition bid by ICN.

Steinhardt refused to confirm the price he paid for the Rorer shares and said he knew “nothing about ICN.”

After the sale by Dow, Rorer shares gained an additional $4.875 Wednesday to peak at $44.375 a share before slipping slightly to close at $43.75 a share.

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Rorer, whose pharmaceutical products include over-the-counter antacids and analgesics, has frequently been the subject of unfounded takeover speculation. Rumored suitors have included CooperVision Inc., Dow Chemical and Kaiser Aluminum & Chemical Corp., said Craig Dickson, an analyst with Interstate Securities Inc. of Charlotte, N.C.

Although analysts say they are unaware of any merger talks between Rorer and ICN, which has garnered much attention on Wall Street in recent weeks, Eugene Melnitchenko of the Dallas brokerage firm of Rauscher Pierce Refsnes, said he “would not be surprised” by an ICN takeover bid. Melnitchenko’s research reports tend to favor ICN.

In addition to having more than $250 million in cash, ICN soon is expected to take a third subsidiary public, providing additional leverage that it could use to pursue a cash and stock acquisition of Rorer--which has a market value of about $1 billion.

Moreover, Melnitchenko said, ICN was edged out by Rorer earlier this year when the drug maker purchased Revlon Inc.'s pharmaceuticals group. That group includes units that had once belonged to ICN and would provide the Costa Mesa company with “excellent distribution in Europe and very good distribution in Brazil,” he said.

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But David MacCallum, who follows Rorer for the San Francisco investment house of Hambrecht & Quist Inc., said that while “anything can happen,” the $50 a share ICN is rumored to have offered for Rorer is the top end of what it is capable of paying for the company.

“I think that’s an awfully big bite for a company of ICN’s size,” he said.

During the year ended Dec. 31, Rorer posted net earnings of $36.8 million on revenues of $338 million. ICN, whose fiscal year ended Nov. 30, reported a net loss of $18.3 million on $62.8 million in revenues.

ICN has been in the spotlight in recent weeks, largely because of speculation that its drug Virazole eventually will be approved as a treatment for acquired immune deficiency syndrome--AIDS. However, in a recent interview, Milan Panic, ICN’s chairman and founder, said he has “no proof that our drug is effective against AIDS in humans.”

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