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Robins Backs New Bid by American Home Products

January 20, 1988|From the Washington Post

WASHINGTON — American Home Products, in a victory over two rivals in the battle to acquire A. H. Robins Co., Tuesday broke a 2 1/2-year stalemate over the Richmond, Va., firm's future.

The New York conglomerate's winning move was to increase the amount of cash that would be paid quickly to tens of thousands of women who claim injuries from the Dalkon Shield intrauterine contraceptive device.

That move won the pivotal endorsement of a committee representing victims of the defective IUD, as well as the backing of Robins' outside shareholders and of the company itself.

In its new bid, American Home enriched by $225 million its offer of "up-front" money for Dalkon Shield claimants by proposing to pay $2.375 billion in cash when the Robins bankruptcy reorganization plan is approved, possibly within a few months. Alternatively, the claimants could receive $2.475 billion within a year after the plan takes effect. The two sums are effectively the same because the lower one would gather interest for months before significant payments would begin.

Sources close to the case said that the huge cash component in American Home's bid may make it the largest settlement ever of a mass product injury claim.

As in an earlier offer, American Home would acquire Robins in exchange for shares of American Home common stock currently valued at about $700 million, and pay all other creditors in full.

Tuesday's agreement, announced jointly by Robins and American Home, appeared to have eliminated two rival bidders, Sanofi S.A. of France and Rorer Group Inc. of Fort Washington, Pa., which had repeatedly sweetened their offers to Robins stockholders. Those offers drew steadfastly chilly reactions from the claimants' committee because they would have set aside money to pay the claimants over a longer period of time.

Broad Range of Products

The combined firm would be the second-largest pharmaceutical company in the nation, behind industry leader Johnson & Johnson. In 1986, American Home's sales of $4.9 billion made it the third-largest pharmaceutical firm, while Robins ranked 16th with sales of $790 million.

American Home's big sellers include Advil, Anacin and Inderal, along with such household products as Chef Boyardee foods, Easy-Off oven cleaner and Black Flag pesticides. Robins is strong in non-prescription preparations, including Robitussin cough medicines and ChapStick lip balm.

President E. Claiborne Robins Jr. called the American Home bid "a positive step toward obtaining a consensus of all parties in our Chapter 11 case."

Until Monday, Robins had embraced Sanofi, which had proposed to acquire a 58% interest for about $600 million, and reportedly would have left E. Claiborne Robins Jr. in place as president and chief executive. He and his family own about 40% of the shares in the 122-year-old company, while outsiders, led by two groups of speculative investment funds, control the balance.

Neither Robins nor American Home Chairman John R. Stafford gave any indication of what role current Robins management would play in the reorganized company, or for how long.

Robert M. Miller, counsel for the outside shareholders, said his committee "is delighted," called the plan "fair to all parties" and said, "We look forward to a prompt reorganization."

Panel Supports Plan

The new offer followed about two weeks of face-to-face and phone negotiations between representatives of American Home and a team of lawyers from Cadwalader, Wickersham & Taft, the law firm representing the claimants: Murray Drabkin, Mark C. Ellenberg and Barry Dichter.

Drabkin said the committee likes the proposal because it eliminates payments into a claimants' trust over a long period.

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