American shareholders of London-based Wellcome PLC better not wait for a better offer for their shares, as the pharmaceutical company attempts to fight off a hostile takeover from Glaxo PLC.
It may not be coming, although directors of the company consider the offer inadequate.
"It's hard to believe Wellcome will be effective in getting a better deal," said James P. Keeney, pharmaceutical industry securities analyst with Mabon Securities Corp., Boston. "It's a 50% premium to the price before the announcement.
"I don't think it's a miserly offer."
Glaxo offered between $14.3 billion and $14.9 billion - or about $16 a share - for the company. It already has the approval of Wellcome's largest shareholder, the Wellcome Trust.
Mr. Keeney also noted the company's net income had been flat to modestly up, yet the offer was valued at more than 22 times Wellcome PLC's estimated 1994 calendar income of $640 million.
Mr. Keeney's recommendation had been neutral, but he now recommends selling or riding the stock out until Wellcome "disappears."
Gregory DePrince, senior vice president with Sunbank Capital Management, Orlando, Fla., which owned Wellcome ADRs representing almost 5 million shares, gradually sold all of its holdings after the announcement of the takeover attempt, receiving about $15 a share on the open market.
Mr. DePrince said he began buying Wellcome PLC in June 1994 because he considered it and other drug companies as candidates for consolidation. He paid an average per share price of $9.60.
"About a year ago, I went to an overweighting in the drug industry, focusing on names that were acquisition candidates based on the industry's loss of pricing power over the last few years," he said.
Also, the different forms of managed care, with or without a health bill from Washington, put pressure on the cost structure of the industry, making drug companies attractive to Mr. DePrince.
Two other companies Mr. DePrince owned - Syntex Corp. and American Cyanamid Co. - were consolidated with others. Hoffmann-LaRoche Inc. acquired Syntex and American Home Products Corp. bought American Cyanamid.
Mr. DePrince owns Warner-Lambert Co., Upjohn Co. and Dow Chemical Co. with the expectation they also will become merger candidates.
"Three down and three to go, according to our view of the world," said Mr. DePrince.
Craig Lewis, chief investment officer with Investment Counselors of Maryland, Baltimore, also sold on the open market the Wellcome PLC ADRs representing 500,000 shares. Mr. Lewis accumulated his holdings more than 18 months ago at around $10 a share, adding he was impressed with the firm's research for a cure for herpes and AIDS.
Mr. Lewis said he received $15.50 a share for Wellcome PLC.
"In some independent work we did, we talked to scientists and we found that, to the extent significant advances would be made in these areas, they would be the developers," Mr. Lewis said.
But after a year of ownership, the Wellcome ADR "was a dull situation," said Mr. Lewis.
The overture by Glaxo was a surprise but not a shock, he said.
"It wasn't expected, and it wasn't something we thought about. But it wasn't as if someone had said they couldn't be a takeover candidate.
"We decided to take our profit and see what develops," Mr. Lewis said.
