F. Hoffmann-La Roche raised its bid for Sterling Drug to $4.4 billion late Monday, only hours after the New York company said it was rejecting the Swiss drug giant's overtures and talking to another suitor.
In a statement released after Wall Street markets had closed, Hoffmann-La Roche said it had boosted its offer to $76 a share from the $72, or $4.2 billion, that Sterling earlier rejected as "grossly inadequate."
The new bid confirmed Wall Street's view that a bidding war was developing. Sterling's shares earlier rose by $2.875 to close at $77, just above Hoffmann-La Roche's new offer.
In rejecting Hoffmann-La Roche's earlier proposal, Sterling said its board believes that remaining independent would be superior over the long term, but as an alternative it was talking to another possible bidder.
While it did not identify the other company, talk on Wall Street seemed to center on a foreign buyer. But analysts said no U.S. company could be written off either, and probably the only certainty was that the company would be sold.
No Response Yet
"At this juncture, we would argue Sterling's a goner. It's just a matter of who owns it and at what price," said Barbara Ryan of Bear, Stearns & Co.
Sterling declined to elaborate on the new offer. Hoffmann-La Roche representatives indicated that the company had not yet received a formal response from Sterling to either offer.
Sterling earlier this month filed a lawsuit seeking to block Hoffmann-La Roche's tender offer, partly on the grounds that units of the Swiss pharmaceutical company engaged in illegal insider trading in Sterling stock and options prior to the offer.
Hoffmann-La Roche Chairman Fritz Gerber said in announcing the increased offer: "We continue to have great respect for Sterling's management and business and strongly believe that an agreed upon combination will enhance Sterling's operations while serving the best interest of its shareholders, employees and the communities of which it is part."
Even before the increased bid, however, analysts had said Roche seemed determined in its effort to acquire Sterling.
Expected Higher Bid
"I expect Roche to stay in there and hang tough," said Neil Sweig of Prudential-Bache Securities. "Sterling has been fighting the very good and smart and necessary fight. The odds are relatively low Roche will back away."
Sterling's rejection of Hoffmann-La Roche and search for a "white knight" came as no surprise. The price of Sterling shares rose $2 a share on Friday to $74.125 in anticipation that a higher bid from another suitor was imminent. Even Hoffmann-La Roche feared this, saying Friday that it was concerned that Sterling may be "contemplating negotiations with other potential acquirers."
A number of industry analysts estimated that the company's cash flow gave Sterling an indicated value in the $80- to $90-a-share range.
New York-based Sterling markets Bayer aspirin, Midol and Phillip's Milk of Magnesia. Hoffmann-La Roche is best known for its Valium tranquilizer.