LONDON, JULY 26: Shire Pharmaceuticals Group PLC agreed to acquire Roberts Pharmaceutical Corp. in a $ 1 billion trans-Atlantic deal between fast-growing specialty-drug companies.The deal between the British and US firms will create a powerful new force in the small world of specialty-pharmaceutical companies, with an array of drugs for ailments ranging from attention-deficit disorder to low blood pressure. It could signal the start of a new wave of consolidation among such drug firms.In a joint interview, the chief executives of the two companies said the transaction blends firms with similar business philosophies and complementary product lines. Unlike large pharmaceutical companies, Shire, based in Andover, England, and Roberts, of Eatontown, N.J., don't do basic drug-discovery research. Rather, they focus on developing and marketing medicines licensed or acquired from other drug companies.The boards of the two companies approved the deal late last week. Under terms of the agreement, which was expected to be announced Sunday night, Roberts shareholders will receive between 1.0427 and 1.2802 in Shire American depository shares for each Roberts share; the exact value will depend on the price of Shire depository shares before the deal closes. Based on the current price of Shire ADRs, Roberts shareholders would receive $30.71 a share.Diversification of ProductsShire is best known for its Adderall medication for attention-deficit disorder. But it also sells niche drugs for epilepsy and osteoporosis and is developing a medicine for Alzheimer's disease. The acquisition of Roberts will allow Shire to diversify by gaining new products and a larger sales force that will allow for expansion in Europe, Canada and the US."The merger will significantly broaden and diversify our revenue base, adding a solid portfolio of existing products and promising pipeline products," said Rolf Stahel, Shire's CEO. "It is not only a cultural fit, it is a strategic fit."Roberts sells an anti-inflammatory medication, Pentasa, for ulcerative colitis, or ulcers in the colon, as well as ProAmatine for low blood pressure and Agrylin for low blood platelet levels. It is working on a new prescription pain reliever that will compete directly with Johnson & Johnson's Ultram. The larger sales force of the combined company - it will have nearly 400 sales representatives world-wide - will give the product a better chance at competing against J&J.The combined company will have annual pro-forma revenue this year of about $380 million. It will retain Shire's name, headquarters and Mr. Stahel as CEO. Roberts's CEO, John Spitznagel, will remain a board member and consultant. Six board members will come from Shire's board, and five from the Roberts board.Substantial Charge ExpectedThe companies expect the deal to close in the fourth quarter, subject to the approval of regulators and shareholders at both companies. Shire saidthe acquisition will boost earnings in 2000, but it expects to take a "substantial" one-time restructuring charge related to the merger in the 1999 fourth quarter. Major job cuts aren't likely.Both companies have been the subject of merger speculation in recent weeks. The current deal started coming together in mid-May, when Mr. Stahel - at the suggestion of Shire Chairman James Cavanaugh - contacted Mr. Spitznagel and arranged for the two to meet in New York. Whipping out his laptop, Mr. Stahel convinced Mr. Sptiznagel that a merger made sense; that conversation led to more negotiations in the following weeks."The chemistry was very good," Mr. Spitznagel said. He added that "we have explored numerous opportunities," as other companies have approached Roberts about possible mergers. But "this seemed the best fit. We see this as an excellent opportunity for Roberts shareholders and employees."In Nasdaq Stock Marke trading Friday, Shire American depositary shares rose 68.75 cents to $27, while in American Stock Exchange composite trading, Roberts shares rose 50 cents to $25.Shire had 1998 revenue of about $130 million, up more than 40% from the year earlier. Roberts had 1998 revenue of $175.4 million, up 40%. Mr. Stahel said this marks Shire's fifth merger in its 13-year history. It probably isn't its last one. Said Mr. Spitznagel: "Both companies have several product and company acquisitions under consideration."Bear Stearns Cos. advised Shire on the transaction, and PaineWebber Inc. advised Roberts.On Friday, Shire reported a doubling of pretax profit for the second quarter and said, in a news release, that it has been named as a defendant in more than 1,300 cases related to fen-phen litigation. The company, which once distributed a version of the diet drug phentermine, said it "intends vigorously to defend all claims made against it and will continue to seek case dismissals based upon product identification. Phentermine is half of the fen-phen diet-drug combination, but in contrast to fenfluramine, it hasn't been withdrawn from the US market.
