The U.S. government has asked Switzerland to lift banking secrecy to assist a probe into suspected insider trading in connection with a hostile takeover bid for Sterling Drug Inc., a Swiss Justice Ministry spokesman said Tuesday.
Sterling is the target of a $4.2-billion takeover attempt by Swiss pharmaceuticals concern F. Hoffmann-La Roche & Co. but has vowed to fight it.
On Monday, Sterling sued La Roche for violating U.S. securities laws in connection with the bid and the Securities and Exchange Commission told Reuters that an investigation had been undertaken and that it had requested information from the Swiss.
In Basel, Switzerland, Hoffmann-La Roche said it will fight the suit but comply with U.S. Justice Department officials. "We view this suit as practically meaningless," Hoffmann-La Roche spokesman Max Gurtner said.
Swiss Justice Ministry spokesman Joerg Kistler told Reuters that the request by the SEC had been relayed to Berne, Switzerland, on Monday night.
Hoffman-La Roche bid $72 a share for Sterling Drug on Jan. 4 after the close of trading. Sterling's stock price had risen $1.75 that day to close at $56.875 a share just before the tender offer was announced. The stock had traded as low as $36 a share on Oct. 19, when the Dow Jones industrial index fell 508 points. The stock price has risen considerably since the tender offer was made public and closed Monday at $73.75.
Seeks Bank Records
Sterling, whose large stock of over-the-counter drugs includes such well-known items as Bayer, Midol and Phillip's Milk of Magnesia, said it planned to respond to Hoffman-La Roche's offer by Jan. 19.
Hoffman-La Roche is best known for its Valium tranquilizer.
Swiss legal sources said the SEC had sought records from three banks in Basel, but Kistler declined to give further information, saying the request had been immediately transferred to the Swiss Bankers' Assn.
Jean-Paul Chapuis, managing director of the Bankers' Assn., said he could not comment on the case immediately.
Kistler said the SEC's request for legal assistance was made under Convention 16 of the Bankers' Assn., a measure adopted under pressure from U.S. authorities to provide access to bank records in cases of alleged violations of U.S. securities law.
The convention allows for an independent commission to review the request and the related bank records to see whether the suspicions are substantiated.
People opening bank accounts in Switzerland are asked to sign a form agreeing to allow their bank records to be inspected.
Amex Launches Probe
Member banks are supposed to refuse to conduct transactions in U.S. securities for anyone who refuses to sign the waiver.
In addition to the SEC probe, the American Stock Exchange said it was looking into suspicious trading patterns in Sterling options shortly before the bid was announced.
The Amex review of Sterling Drug options trading was automatically triggered by market surveillance computers that detected unusually high volume just before the tender offer was announced, an exchange official said.
In its lawsuit, Sterling has alleged that two affiliated Hoffman-La Roche companies traded Sterling stock and options at the same time they were privy to confidential, non-public information before the Hoffman-La Roche bid was announced.