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$1B U.S./U.K. drug deal
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July 26, 1999: 4:48 a.m. ET
Britain's Shire buys Roberts of New Jersey, creating the fourth largest U.K. group
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LONDON (CNNfn) - Britain's Shire Pharmaceuticals is buying U.S.-based Roberts Pharmaceutical Co. for $1 billion, creating a U.K. pharmaceutical powerhouse with marketing reach across Continental Europe and the financial heft to pursue further acquisitions.
With total market capitalization of $2.4, the combined company would be Britain's fourth largest drug company, trailing Glaxo Wellcome, SmithKline Beecham and Astra Zeneca.
The price represents a 23 percent premium over Roberts' $25 closing share price Friday. Upon completion of the transaction, Shire shareholders will hold about 56 percent of the combined company, while Roberts shareholders will control the remainder.
The new entity will have $126 million in cash with which to pursue further buyouts in Europe, and to offer its services as a "licensee of choice" for other biotech companies that lack their own sales and marketing capabilities.
Rolf Stahel, Shire's chief executive, called the deal an important step toward achieving Shire's goal of exceeding $1 billion in revenues by 2005.
"The merger will significantly broaden and diversify our revenue base, adding a solid portfolio of existing products and promising pipeline products," Stahl said.
He added the merger will give the enlarged group greater negotiating leverage and cash with which to pursue product licensing contracts. As of June 30, Shire had a $79 million cash stockpile with no debt; Roberts had about $130 million in debt and $47 million in cash and investments.
Shire, based in Andover, England, has been on the lookout for new opportunities. The company markets Adderall and DextroStat, used in the treatment of attention deficit disorder, and the epilepsy drug, Carbatrol. Shire co-developed Adderall with Johnson & Johnson.
Roberts, with headquarters in Eatontown, New Jersey, specializes in therapeutic products used to treat cancer, hypertension and ulcers.
The combined company would have five key new products in the developmental pipeline, including Reminyl for the treatment of Alzheimer's to RL0903 for prostate cancer.
Both companies' boards have given unanimous consent to the deal. Yamanouchi Pharmaceutical Co. of Japan, which owns 16 percent of Roberts' share capital, and Robert Vukovich, a 6 percent shareholder in Roberts, have pledged to tender their shares.
HealthCare Ventures, which holds an 8 percent stake in Shire, is also backing the tie-up.
About 70 percent of the new group's shares will be held in the United States, where Shire lists as an American Depositary Receipt on the Nasdaq. The majority of the remaining 30 percent will be held in Britain.
Under terms of the deal, Roberts will swap each of its shares for 1.374 Shire ADRs. The exchange implies a $30.71 for each Roberts share. Based on Friday's closing prices, the deal would create a company worth 1.5 billion pounds, or $2.4 billion.
A termination fee of $30 million applies to any company that backs out of the deal. 
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