American Home Raises Stock Offer, Would Speed Claims in Robins Bid
American Home Products Corp. extended the bidding war for A. H. Robins Co. Tuesday by offering to pay shareholders $700 million in stock as well as pay claims more quickly to women who say they were injured by Robins’ Dalkon Shield birth control device.
A committee representing shareholders in Robins’ Chapter 11 bankruptcy reorganization immediately endorsed the bid, which is $150 million more than American Home’s initial offer and also higher than bids from two other suitors.
The Robins board of directors on Jan. 1 voted to accept a bid from Sanofi, the second-largest pharmaceutical firm in France.
Before that, Robins had signed a merger agreement with Rorer Group Inc. of suburban Philadelphia. Robins will have to pay Rorer $25 million for backing out of that deal.
Robert Miller, a lawyer for the shareholders group, told Reuters that his clients sent a letter to Robins asking the company, based in Richmond, Va., to meet by Friday and decide on the offer.
Although neither Robins nor Sanofi has placed a value on the Sanofi bid, Miller said his group valued it at between $15 and $16 a share.
“We feel this is an offer that separates the men from the boys,” Miller said, referring to the American Home bid. “It will be up to Robins to show us they have something better. If not, we are prepared to take action in bankruptcy court.”
Robins stock rose 50 cents a share Tuesday to close at $23.50 on the New York Stock Exchange. American Home Products shares fell $1 to $74 after the offer was made public.
Sanofi’s offer was worth $600 million, while Rorer’s agreement featured a stock swap valued at $440 million.
Ross said an important feature of the new bid was a provision that allowed American Home stock to rise or fall 10% without affecting the $700-million figure. The ratio of stock that shareholders would receive will be determined before the completion of the deal.
Ross said the new bid also is better for Dalkon Shield claimants, who prompted Robins to seek Chapter 11 protection in August, 1985, by filing lawsuits alleging that they were injured by the company’s birth control device.
American Home would pay $1.4 billion of the $2.475 billion within the first two years or, as an alternative, pay $2.15 billion in cash at closing. “In either case, this strikes me as being superior to the Sanofi proposal and to Rorer’s public proposal,” Ross said.
Sanofi’s proposal for paying the claims involved a $2.375-billion letter of credit and a $100-million cash payment by Robins. No more than 50% of the credit could be used in the first two years.
Rorer had agreed to provide $1.75 billion for Dalkon Shield claims, but that was before U.S. District Judge Robert Merhige Jr. set the higher figure.
American Home said in its news release that Aetna Casualty & Surety Co. would provide an unspecified amount of cash for the fund and would “provide certain insurance coverages.”
Murray Drabkin, attorney for the Dalkon Shield Claimants Committee, said the claimants would oppose the American Home plan.
American Home’s offer to pay a smaller amount up front is “simply unacceptable,” he said, because claimants thought the $2.475-billion figure was too low to start.
Robins said in a news release Tuesday that it would not comment on the new offer until management and advisers had reviewed it.
Ross said the shareholders committee had been negotiating with all three bidders since the Robins board chose the Sanofi offer. He said it was not surprising that American Home increased its offer.
