Sterling Drug Inc. announced yesterday that it is looking for a friendly bidder to save the company from the hostile $4.1 billion takeover attempt launched two weeks ago by Swiss pharmaceutical giant F. Hoffmann-La Roche & Co.
Following the announcement, which included an angry rejection of Hoffmann-La Roche's original tender offer of $72 a share as "grossly inadequate" and "not in the best interests of Sterling Drug and its stockholders", Hoffmann-La Roche sweetened its offer to $4.4 billion, or $76 per share.
Hoffmann-La Roche Chairman Fritz Gerber said that the new bid will "enhance Sterling's operations while serving the best interests of its shareholders."
Trading in Sterling shares on the New York Stock Exchange ended yesterday before Roche raised its bid. The stock closed at $77.37 1/2, up $3.25.
Sterling's management would not comment on their search for a white knight beyond the news release, but some analysts named Eastman Kodak Co., General Electric Co. and Procter & Gamble Co. as being among the firms that might have been approached as potential purchasers.
"I would assume that they're looking for a company that is not as broadly involved in the pharmaceutical industry as Roche is," said Samuel D. Isaly, head of pharmaceutical research for the New York brokerage firm S.G. Warburg & Co. Inc.
"That way the amount of restructuring that would be done after a takeover would be less," Isaly said.
Officials at General Electric declined to comment on the rumors. Officials at Kodak and Procter & Gamble could not be reached for comment.
The search for a white knight is the second step Sterling management has taken to fend off Hoffmann-La Roche's unsolicited takeover bid since it has was made Jan. 5.
Last week, Sterling filed a lawsuit against Hoffmann-La Roche, alleging, among other things, that the Swiss firm had failed to make adequate disclosure of its financial position.
In yesterday's statement, Sterling said it would continue to "vigorously" pursue the suit.
But some analysts are skeptical of how successful Sterling's attempts to defend itself will be.
"I'm not all that certain that there is a white knight out there," said Neil Sweig, who follows the drug industry for Prudential-Bache in New York. "Time is running short," Hoffmann-La Roche has said it will start buying stock under its offer on Feb. 2.
"The odds are now very slim that Sterling drug will be an independent company when 1988 ends," Sweig said.
Yesterday's announcement by Hoffmann-La Roche to increase the tender offer to $76 is expected to further complicate Sterling's search for a new bidder.
In a separate announcement yesterday, Hoffmann-La Roche said that its sales dropped 1.2 percent in 1987, due largely to the substantial appreciation of the Swiss franc against most currencies, especially the U.S. dollar.
According to the company, as expressed in local currencies, sales were up 14 percent over 1986.