Pennwalt Sells Drug Unit; Shareholders May Benefit

Pennwalt Corp. said Thursday that it is selling its drug unit to Britain’s Fisons PLC for $460 million in cash and may distribute the proceeds to shareholders, sending rumored takeover target Pennwalt’s stock up sharply.

Pennwalt said the sale, which exceeds the amount most analysts had expected, may be used to buy back stock or pay a special dividend. Analysts estimated that the payout could be about $24 a share.

“The price is almost unbelievable,” said Eppler, Guerin & Turner analyst Robert Hedrick, who noted the pharmaceutical unit’s recent sluggish results. “If they’d gotten half that amount, I would have thought they had done well.”

Pennwalt shares rose $2.25 to $84.25 in active New York Stock Exchange trading on the better-than-expected proceeds from the sale and the prospects for a large dividend.

Pennwalt has been the object of takeover rumors since the New York firm Centaur Partners bought 7.6% and has said it is considering a bid. Petroleum chemical maker Ethyl Corp. also has been rumored as another possible buyer.

While in the near term it continues to be vulnerable to a takeover, the closing of the deal in two to three months will make it less attractive, analysts said.

Supplies Family Doctors

“Once the money is taken in (by Pennwalt) and spent on either a share repurchase or a special dividend, the company is considerably less attractive,” Merrill Lynch & Co. analyst Jack Henry said.

The drug division, based in Rochester, N.Y., supplies a range of well-established prescription products to family doctors in the United States and has extensive research and manufacturing facilities. Fisons is a diversified British pharmaceuticals and manufacturing concern.

In London, Fisons Chairman J. S. Kerridge described the acquisition of the drug unit as “an excellent fit for Fisons, reinforcing its success in the U.S. pharmaceuticals market and accelerating its growth plans.”