Warner-Lambert To Buy Agouron
Warner-Lambert Co. agreed to buy Agouron Pharmaceuticals in a $2.1 billion deal giving it a developer of drugs that treat cancer, AIDS and other serious diseases.
Under the pact, announced after the markets closed Tuesday, each share of Agouron stock will be exchanged for approximately $60 in Warner-Lambert (WLA) stock.
Shares will exchanged in a range of 0.8108 to 0.93 shares of Warner-Lambert common stock for each share of Agouron (AGPH) common stock. The exchange ratio will be based on the average price of Warner-Lambert stock prior to the transaction's closing, the companies said.
If they fail to complete their merger, Warner-Lambert has the option to purchase up to 19.9 percent of Agouron's common stock and has the right to a fee of at least $60 million.
Warner-Lambert, based in Morris Plains, N.J., makes Listerine, heartburn remedy Zantac 75 and Trident gum. Its Parke-Davis and Goedecke pharmaceuticals divisions make pain relievers, anesthetics, and diabetes and cholesterol treatments. Shares rose 1 5/8 to 69 1/8.
The purchase will allow Warner-Lambert to augment its new product pipeline and will significantly expand its presence in anti-viral and cancer treatments. In addition to gaining access to several promising late-stage compounds, Warner-Lambert gets Viracept, a leading HIV drug, immediately if the transaction is completed, Warner-Lambert said.
"There's a strategic fit there," said Jay Silverman, an analyst at BancBoston Robertson Stephens in New York. While adding the deal was a bit of a surprise, Silverman pointed out that Warner-Lambert is developing its own AIDS drug and is building its line of cancer treatments.
"There's been speculation since last summer that Agouron was on the block," though DuPont (DD), Pharmacia & Upjohn (PNU) and Abbott Labs (ABT) were seen as more likely suitors, the analyst said.
The transaction will not require Warner-Lambert shareholder approval and is not expected to dilute future earnings.
"In taking this action, we believe we have strategically enhanced our prospects for long-term growth without sacrificing our ability to meet expectations of superior near-term earnings performance," Melvin R. Goodes, Warner-Lambert chairman and chief executive officer, said in a statement.
Shares of Agouron, based in La Jolla, Calif., rose 3 21/32 to 56 13/16 ahead of the announcement.
Written By Stephanie O'Brien, CBS MarketWatch