Norwegian investors torpedo merger between Hafslund Nycomed and Ivax

Nycomed says it will pursue other partnerships

Norwegian contrast developer Hafslund Nycomed is picking up thepieces after the failure of its proposed merger with U.S. genericdrug firm Ivax. Representatives from the Oslo firm say it willcontinue to look for strategic relationships with other companiesin the wake of the aborted deal.

Hafslund Nycomed and Ivax of Miami called off the merger justbefore last month's Radiological Society of North America meeting,when Nycomed realized that it could not get a two-thirds majorityof its shareholders to vote in favor of the deal. The two firmshad announced the merger in October (SCAN 10/25/95).

The merger appeared in trouble from the start as many investorsfrom both companies failed to embrace the proposal. On the Ivaxside, shareholders were disappointed because the deal did notmeet expectations that had been swirling in the industry in theweeks prior to the announcement. Ivax shareholders were hopingtheir company would be acquired at a price of about $42 a share,a healthy premium over the company's price at the time. The firm'sstock began dropping on news of the merger, reaching a low of$22 a share before bouncing back. Analysts also questioned thewisdom of merging two pharmaceutical firms with such diverse businesses.

In Hafslund Nycomed's case, several of its major Norwegianinvestors were cool to the partnership with Ivax. News reportsattributed their resistance to a variety of factors, includingIvax's low stock price and disappointing third-quarter results.Some analysts also speculated that the Norwegians had nationalisticreasons for opposing the loss of control of their company to aU.S. firm. Ivax Nycomed would have been headed by Ivax chairmanand CEO Phillip Frost and Ivax investors would have controlled54% of the merged company.

Hafslund Nycomed believes that the main reason for the failureof the merger was the unfamiliarity of some Norwegian investorswith the generic drug market, according to Eric Cameron, seniorvice president for corporate communications for Nycomed.

"They were struggling to understand the deal because theirinsight into generics is limited," Cameron said. "Thegenerics business in Europe is not as developed as in the U.S."

Hafslund Nycomed scheduled a shareholder meeting for Nov. 17to vote on the merger, but abandoned its plans after realizingthat it would fall well short of the two-thirds shareholder approvalneeded to approve the deal under Norwegian regulations. Shareholderapproval stood in the high 50% range just before the meeting,according to Cameron.

Instead of the merger, the two companies signed a joint productlicensing pact to exchange pharmaceutical technology through eachother's sales channels. No diagnostic imaging agents were amongthe products mentioned as being covered by the agreement. HafslundNycomed also said it would go forward with plans to spin off itsenergy business.

Ivax said it would take a $3 million charge in the fourth quarterfor expenses related to the breakup of the deal. Hafslund Nycomedhas not yet determined how much the agreement's collapse willcost the company, Cameron said.

In spite of the merger's demise, Hafslund Nycomed will continueto look for corporate partners as it has in the past few years,according to Cameron. The collapse of the deal should have nolong-term ramifications on Hafslund Nycomed's operations, Cameronadded.

"We will be delivering the same products with the samegrade of quality," he said. "We will broaden our portfolio.This shouldn't be a setback in that respect at all."