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Dalkon Shield Maker to Merge With French Firm

January 02, 1988|Associated Press

RICHMOND, Va. — A. H. Robins Co., struggling to satisfy injury claims from users of its Dalkon Shield IUD, announced the selection Friday of the French pharmaceutical giant Sanofi from among three potential merger partners.

Robins' board of directors made the selection after meeting for 11 1/2 hours over two days to weigh merger offers from Sanofi, Rorer Group Inc. of Fort Washington, Pa., and New York-based American Home Products Corp.

E. Clairborne Robins Jr., Robins' president and chief executive officer, said the board felt the Sanofi proposal best serves the interest of Dalkon Shield claimants, other Robins creditors and stockholders.

Robins, based in Richmond, filed for protection from its creditors under Chapter 11 of the federal bankruptcy code in 1985 in the face of injury claims from users of its Dalkon Shield intrauterine birth-control device.

$2.47 Billion for Claims

Roscoe E. Puckett Jr., a Robins spokesman, said Sanofi plans to acquire a controlling interest in Robins and provide $2.47 billion to satisfy Dalkon Shield claims.

Robins began marketing the Dalkon Shield in 1971. Sales in the United States were suspended in 1974 after four deaths and 36 septic abortions among users were reported.

Other Robins products include Robitussin cough medicine and Chap Stick lip balm.

Puckett refused to place a dollar value on the offer by the Paris-based Sanofi, France's second-largest drug firm.

Robins has until Wednesday to submit a new bankruptcy reorganization plan to U.S. District Judge Robert R. Merhige Jr. The Sanofi proposal will be incorporated in the amended plan, Puckett said.

Sanofi Proposed a Trust

Sanofi proposed establishing a trust to administer and settle Dalkon claims, Puckett said. The trust would be funded with an initial cash payment by Robins of $100 million and a letter of credit for $2.37 billion, he said.

According to Puckett, Sanofi would acquire a controlling interest in Robins by using an American subsidiary, CEVA Laboratories Inc., as the merger vehicle. CEVA, a Delaware corporation, is in the animal health and veterinary drug business.

Puckett said Robins would be merged into CEVA, which would change its name to A. H. Robins Co. Inc.

As a result of the merger, Robins stockholders would receive 83% of the outstanding stock of the new A. H. Robins, and Sanofi would retain the remaining 17%.

Sanofi's directors will vote on the plan Tuesday, Puckett said.

The proposal also is subject to confirmation of Robins' reorganization plan and approval by Robins stockholders and the necessary government agencies.

Offer Is Sweetened

Rorer, with whom Robins once had an agreement to merge, last week sweetened its offer to about $2.92 billion. That bid included a $2.28-billion trust fund for Dalkon Shield claimants.

Last summer Rorer proposed buying Robins for about $2.63 billion, including $1.75 billion to cover potential claims. But that was before Merhige said the reorganization must set aside $2.47 billion to satisfy potential claims.

American Home, which abandoned an earlier bid for Robins in February, re-entered the bidding on Dec. 23. The consumer products manufacturer said that in exchange for all 24.2 million outstanding Robins' shares, it would put up $550-million worth of American Home stock and pay the Dalkon claims over a seven-year period.

In trading on the New York Stock Exchange on Thursday, Robins closed up 12.5 cents to $20.50, Rorer fell 25 cents to $36 and American Home Products rose $1 to $72.75.

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