Directors of the bankrupt A.H. Robins Co. will meet Monday to consider a second merger proposal by Rorer Group Inc., which wants to weld the two corporations into the nation's sixth-largest seller of over-the-counter medications.
Rorer's bid, which involves an exchange of securities, went to Robins Thursday night and expires at 6 p.m. Monday. Robins, a 121-year-old family-controlled corporation, has fended off past merger offers.
Robins "intends to continue to pursue" the reorganization plan it filed in U.S. Bankruptcy Court in Richmond in April, although "its management and board of directors will study the Rorer proposal," a spokesman said yesterday. Rorer Chairman Robert E. Cawthorn said that the offer is "in the best interest of all concerned" and called the proposed combination of the two firms, which are approximately the same size, "a perfect fit."
The proposed merger would "greatly enhance shareholder value," Cawthorn said. On the New York Stock Exchange, Rorer's common stock closed at $45.50, down 87 1/2 cents, and Robins' shares rose 37 1/2 cents to $26.37 1/2.
Rorer said it would put $1.75 billion in trust for victims of the Dalkon Shield, the intrauterine contraceptive device Robins sold in the early 1970s. A tide of Dalkon product liability lawsuits led Robins to file for Chapter 11 protection in August 1985. Since then, nearly 330,000 women have filed notices of possible claims.
Robins, in its reorganization plan, also proposed putting $1.75 billion in trust for users of the IUD whose claims are found valid. Robins said, however, that it would put up only $75 million of its own money, and would draw on a letter of credit from a consortium of banks for the remaining $1.67 billion.
In Ft. Washington, Pa., a Rorer spokesman said that his company would put "much more" of its own money in trust, but declined to specify the amount. Rorer would also draw on a letter of credit from a banking consortium for the balance.
In February, American Home Products Corp. offered to put up the identical sum in cash as part of a $2.4 billion buyout bid. In March, Rorer followed with its first offer, which was said to be virtually identical to American Home's but which Rorer has not publicly described.
Both offers early this year were welcomed by the Dalkon Shield Claimants Committee but were withdrawn in short order after reportedly meeting chilly receptions from Robins.
For Robins stockholders, the new Rorer proposal offered the equivalent of about $30 per share -- about $7 more than under the American Home bid. More than 40 percent of Robins' stock is owned by Chairman E. Claiborne Robins, President E. Claiborne Robins Jr., and members of the family.
Rorer's proposal is geared to the price of a share of its common stock during a time period to be specified. If the price of Rorer's stock is $48 or higher, a share of Robins stock would be exchanged for 62.5 percent of a Rorer share. If the price is less than $48, a share of Robins stock would be exchanged for a convertible preferred share of Rorer with a par value of $30. The convertible share would pay a dividend of between 2.4 percent and 6 percent, based on the actual price of the Rorer common stock in the specified time period.
Murray Drabkin, counsel to the Dalkon Shield Claimants Committee, declined to comment. But in past bankruptcy court hearings, he has stressed that he would regard as unacceptable any plan that would give additional money to stockholders. Under the bankruptcy code, he has emphasized, the owners of a corporation in Chapter 11 are the creditors, not the stockholders.
In New York, Marc C. Bergschneider, managing director of Drexel Burnham Lambert Inc., Robins' financial adviser, called Rorer's new offer "much better" than its first one.