Alpharma agrees to King takover offer

BRISTOL, Tenn. – Alpharma Inc. on Monday agreed to King Pharmaceuticals Inc.’s $1.6 billion cash takeover offer – a move aimed at growing the Bristol, Tenn., company, even in lean economic times.
King will pay Bridgewater, N.J.,-based Alpharma $37 a share for the company, pending approval by the U.S. Securities and Exchanges Commission.
The per-share price is $4 above King’s initial offer of $33.
Alpharma shares rose $2.05, or 6.1 percent, to $35.55 in afternoon trading Monday. King shares rose 71 cents, or 8.2 percent, to $9.33.
A key goal of the deal is to expand King’s pain drug franchise, which consists of the chronic pain treatment Avinza and the muscle relaxant Skelaxin. These two drugs made up about half of the company’s 2007 revenues.
“We’re creating a platform for long-term growth,” Brian Markison, King’s president and chief executive officer, said Monday. “One of the things we’re excited about is its [Alpharma’s] animal health division that has a long history of steady cash flow. This will make us more diversified in a somewhat choppy pharmaceutical market.”
Markison said King is “fairly advanced” in its planning but isn’t prepared to talk about what the change will mean for Alpharma’s approximately 2,000 employees or its manufacturing sites.
“We expect to create a few more manufacturing jobs [at King],” he said, “A lot depends on the pipeline. If their new product Embeda [morphine] does well, we could be working 24-7.”
Markison declined to say how many jobs might be added at Bristol, but some of the expected increase will be tied to the anticipated production of Remoxy, King’s oxycodone pain medication that is currently in development.
Most of the general and administrative, financial, legal and human resource functions are expected to be handled through King’s Bristol offices.
“The number one thing we want to do is start integrating these companies,” Markison said Monday. “It’s quite meaningful to our shareholders and our employees. We’re very excited about this potential transaction. We feel like we’re at the top of the ninth inning here.”
Markison said King will borrow about $775 million from Wachovia and Credit Suisse to help pay for the acquisition.
The deal is expected to close by the end of the year, adding to adjusted earnings and savings between $50 million and $70 million in costs in the second full year after closing.
“The conditions of the market actually helped us,” Markison said. “We have an extremely strong balance sheet. So the small amount we needed to borrow probably precluded other companies our size from trying to take advantage of this.”
On Aug. 4, King officials made a written offer to buy Alpharma for $33 a share, but Alpharma’s board of directors rejected it. King then raised its bid to $37 a share on Sept. 11, making the total offered $1.6 billion. The following day, King officials took the offer directly to Alpharma shareholders, launching a tender offer to buy Alpharma’s stock at that price.
That offer – originally set to expire Friday – was extended to Dec. 19. As of the first expiration date, 73 percent of Alpharma’s shares had been tendered under the offer.
Alpharma, meanwhile, said it spent the past two years building up shareholder value and has been acting in the best interest of stockholders.
“After careful evaluation, our board determined that a combination with King is in the best interest of our shareholders and provides them immediate access to this value,” Alpharma President and Chief Executive Dean Mitchell, said in a statement.
Herald Courier reporter David McGee contributed to this report.
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