Alpharma rejects King Pharmaceuticals’ $1.55 billion offer as inadequate

New Jersey-based specialty pharmaceuticals company Alpharma Inc.'s board of directors took a leaf out of biotechnology firm ImClone Systems and formally rejected King Pharmaceuticals' hostile takeover bid of $37.00 a share on Friday, asserting that the offer was too low. The board also said that ''multiple'' parties who might be interested in acquiring the company at a higher price had approached it.

In a similar move earlier this month, ImClone had rejected Bristol-Myers Squibb's $4.3 billion offer, and said it has received a substantially higher offer from a large unnamed pharmaceutical company. Consequently, Bristol-Myers raised its bid from $60 to $62 a share and said it intended to take it directly to shareholders in an attempt to pressurize the management.(See: ImClone rejects Bristol-Myers Squibb's $4.3 billion bid; cites $6.1 billion fresh offer and Bristol-Myers Squibb raises bid for ImClone to $4.7 billion)

King Pharmaceuticals had originally offered $37 per share, which valued the company at $1.55 billion. The offer was a 53.9-per cent premium over Alpharma's closing share price on 21 August, the day before King's original offer of $33 per share went public. King has spent the last few months pursuing Alpharma, which makes pain management treatments and also has a separate, but highly lucrative, animal health unit.

However, Alpharma has repeatedly rejected King's advances in both public and private forums, forcing King to continually raise it bid, which began at $33 per share and valued the company at $1.4 billion. The continued rejections from Alpharma have also caused King to get hostile, taking its $37 per share bid directly to shareholders.

The Alpharma board has pleaded with shareholders to do nothing and announced on Friday that while looking for strategic alternatives, it has begun the due diligence process with several other suitors who have expressed more-profitable interest. "We have received expressions of interest from multiple parties who contacted us following King's public disclosure of its proposal or who our financial advisors solicited at our request," Alpharma CEO Dean Mitchell said in a statement.

"We have entered into confidentiality agreements with a number of these parties who have now begun their due diligence review, and have already received a written preliminary indication of interest for a business combination from a party that includes a per-share price in excess of the King offer of $37.00 per share," Mitchell said.

In a filing with the Securities and Exchange Commission, Mitchell said Alpharma has already received offers better than $37 per share and invited King to participate in the auction process. Investors were pleased with the Alpharma board decision and feel the company is worth more, pushing shares of Alpharma up 1.9 per cent, or 69 cents, to $37.27, in morning trading on Friday, while King's shares were off 12 cents, to $9.76.