A big Illinois medical company said yesterday that it will buy North American Vaccine Inc. of Columbia in a deal valued at $390 million, a move that should ensure the survival and expansion of the troubled vaccine maker.
Baxter International Inc. of Deerfield, Ill., said it will pay $7 a share, largely in stock, in a deal expected to close in April. It will guarantee bank loans to fund North American Vaccine in the interim. While remaining in Columbia, North American Vaccine will become part of a fast-growing Baxter unit that aims to capitalize on a worldwide revival of interest in vaccines.
The buyout price infuriated many of the vaccine company's small shareholders, though their anger was focused less on Baxter than on the board of North American Vaccine, which they blame for years of strategic blunders that put the company in a weak position. The $7 buyout price represents a 20 percent premium over Wednesday's closing price. But many investors had bought in at $20 or more a share based on glowing reports from the company about its prospects.
Online chat rooms for North American Vaccine shareholders crackled with indignation and black humor yesterday. "Biggest heist since the Brink's robbery," an investor calling himself Tom Smith wrote of the buyout.
Neil Flanzraich, a pharmaceutical executive in Miami and chairman of North American's board, put the best face on the situation. "We believe the acquisition by Baxter will significantly increase the commercial potential of the North American Vaccine product portfolio and represents the best alternative available to our shareholders," he said in a statement.
For many of North American Vaccine's 300 employees, the buyout came as a welcome relief. With the company's cash reserves dwindling fast, they had faced the prospect of having their employer operate under bankruptcy supervision or even go out of business.
A huge cash infusion from Baxter should take the pressure off and give the company a chance to capitalize on its portfolio of innovative vaccine research. In the near term, it is trying to complete a deal to sell meningitis vaccine in Britain that should result in a $60 million shot in the arm starting next year.
For Baxter, a medical-products maker that is growing fast through hard-nosed acquisitions, the deal broadens a limited but promising vaccine portfolio. The company owns a unit in Austria that has one vaccine on the market and is developing several more against viruses. The strength of North American Vaccine is in using advanced techniques to make vaccines against bacteria.
"I really believe this makes a lot of sense," Harry M. Jansen Kraemer Jr., Baxter's president and chief executive, said in a telephone interview from Deerfield. "We decided that the whole area of vaccines will continue to be one of the highest-growth areas of health care."
A bonus, Kraemer and other Baxter executives said, is that the acquisition will give them a toehold in Maryland's booming biotechnology corridor, one of the world's biggest concentrations of young, innovative biotech companies. Baxter, known for buying young companies and fitting them smoothly into its operations, has no large presence in the region now.
Baxter executives said substantial job growth will be likely at North American Vaccine as the unit gears up to put new products on the market. No immediate changes are expected in the company's management.
Some analysts saw the deal as a plus for Baxter. "We see the acquisition as substantially broadening the new-product flow," said David Gruber of Lehman Brothers Inc. "We see this as a good thing longer-term."
North American Vaccine is widely recognized for the quality of its science, but the company has had problems translating that expertise into revenue and profit. Its only U.S.-approved product, a childhood vaccine called Certiva, was late to market and hobbled by severe production problems. Top management has been in turmoil over the past couple of years.
The company is run now by Randal Chase, a veteran pharmaceutical executive, but he has been at the helm less than a year and North American ran low on cash before his plans could translate into improved financial results.
North American Vaccine shares peaked at $29.75 on Oct. 10, 1997, amid high hopes for Certiva, but traders drove them down drastically as the company's problems came to light. The shares closed yesterday at $6.18 3/4, up 37 1/2 cents.
Shares of Baxter fell 62 1/2 cents on the buyout news, closing at $67 in trading on the New York Stock Exchange.