Eastman Kodak Co. moved closer to completion of its controversial $5.1 billion purchase of Sterling Drug Co. yesterday, ending what company officials conceded was a "strange" week for the photographic products giant.
Last Friday Polaroid Corp. announced that it would be seeking $5.7 billion in damages from Kodak in the two firms' longstanding patent infringement suit over instant cameras. The amount is significantly higher than many observers had expected.
Kodak also acknowledged on Friday that the lithium batteries it produced for a number of Black & Decker Co. products did not last as long as advertised.
Kodak will now bear the financial burden for the recall of thousands of flashlights and smoke detectors.
Then, on Monday, Moody's Investors Service Inc. lowered its rating on about $2.5 billion of Kodak debt, citing the heavy debt load assumed by Kodak as a result of the Sterling merger.
And yesterday, a federal judge in Texas issued a temporary injunction blocking the proposed merger of Kodak's photofinishing subsidiary with another wholesale photofinishing company based in North Carolina. The injunction was sought by a rival firm on antitrust grounds.
But officials of Rochester-based Kodak were cheered by the closing of the Sterling tender offer, which leaves the firm with 96 percent of the outstanding shares of Sterling and the foothold in the pharmaceutical business that it has sought for a number of years.
"At least the things on the good side of the ledger are concrete," said Kodak spokesman Ronald Roberts, who asserted that the Sterling deal far overshadowed the week's bad news.
Moody's action, he said, would not "hinder anything we want to do", since the battery business was "not a moneymaker anyway" and Kodak "vigorously contests" the Polaroid damages request.
Kodak said it will appeal the Texas court ruling.
Kodak and Sterling announced plans to merge Jan. 22 following an unfriendly takeover attempt of Sterling by the Swiss drug firm Hoffman-La Roche.
The move was sharply criticized by industry analysts, many of whom said that Kodak was paying too much for the New York pharmaceutical house, which makes Bayer aspirin, Midol tablets and a number of other well-known drug and household products.
Kodak will have to borrow almost all of the $5.1 billion that will be needed to purchase Sterling, bringing the firm's debt to 55 percent of its capitalization, a percentage that is deemed high by some industry observers.