Two suitors courting A. H. Robins Co. have deferred to American Home Products Corp., which made a bid for the pharmaceutical company that apparently could not be matched.
Both Sanofi S.A. of France and Rorer Group Inc. said Wednesday that they could not top American Home's bid, which offered prompt payment to women who say they were injured by Robins' Dalkon Shield birth control device.
Sanofi said in a statement that competing with American Home's offer was not in the best interest of shareholders.
"It is not reasonable to us to change our proposal and compete with this type of offer," said Jean-Francois Dehecq, Sanofi's vice chairman and chief operating officer.
Pennsylvania-based Rorer, the smallest company in the bidding, said it does not have the financial resources to match American Home, the New York-based maker of Anacin and Dristan. "It would not be financially prudent for the rest of our business," said spokeswoman Susan Atkins.
Richmond-based Robins--the maker of Robitussin cough medicine and ChapStick lip balm--sought protection from creditors under Chapter 11 of the U.S. Bankruptcy Code in August, 1985, because it was inundated by lawsuits from women who said they were injured by the Dalkon Shield intrauterine birth control device.
American Home's plan would provide either a single payment of $2.375 billion in cash for Dalkon Shield claimants on the effective date of the reorganization or $2.475 billion paid within one year of the date of the plan.
Sanofi had offered paying $2.47 billion over four years, while Rorer planned to raise $2.47 billion over seven years. American Home, with annual revenue of more than $3 billion, is the largest of the bidders.
"With a bag of cash on the table, it's pretty difficult to look at letters of credit," said H. Arvid Johnson, Robins' senior vice president and general counsel.
"American Home Products has made a dramatic amount available immediately to claimants," said Larry Marsh, a financial analyst at First Wheat Securities in Richmond. The company has $1 billion in cash reserves, and "they can set some of that aside," Marsh said.
A key factor in Robins' acceptance of American Home's offer was the endorsement of Murray Drabkin, a lawyer for the Dalkon Shield Claimants Committee. Previously, the claimants committee did not support specific acquisition plans.
"It was amazing because the claimants accepted the offer," Marsh said.
U.S. District Judge Robert R. Merhige Jr. earlier set $2.47 billion as the amount needed to cover nearly 200,000 Dalkon Shield claims. That decision triggered a series of offers and counteroffers for the firm.
"All of a sudden A. H. Robins has become a hot commodity. Before, people were not interested because they were buying into a lawsuit," said Martin I. Klein, a bankruptcy lawyer with the firm Dreyer & Traub in New York.
Klein said Merhige deserves credit for trying to reach a resolution of the case that will satisfy both claimants and shareholders.
American Home Products' sweetened proposal offers a swap of its common stock, at present valued at $700 million.
Robins' plan for reorganization must be filed in bankruptcy court by midnight Monday. A public hearing on the adequacy of the company's plan and disclosure statement is set for Feb. 19.
As part of the plan, Aetna Life & Casualty Co. said Wednesday that it has agreed to make a payment of $100 million in settlement of all outstanding insurance obligations between Aetna and Robins. Most of the payment will be contributed to the Dalkon Shield trust fund.