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Executive Summary

American Home Products' offer of $ 2.375 bil. upfront for Dalkon Shield claimants won A.H. Robins away from two other suitors. AHP's deep cash resources (current net cash position of $ 750 mil.), support the bid that has brought endorsements from the Robins board, shareholders and claimants. A fourth amended A.H. Robins reorganization plan, incorporating a proposed merger with American Home, is scheduled to be filed in Richmond Federal Court by Feb. 1 -- almost one year to the day after American Home's initial offer for Robins. A hearing on the proposal will follow approximately 25 days later. Sanofi has publicly bowed out of the bidding, stating it has no interest in competing with AHP's huge cash commitment. The French company says it is interested in "forging business partnerships" in the U.S. "given the right opportunities." While Rorer is not officially withdrawing, the firm's offer will not be improved further, the company said. The revised AHP offer, with the improved cash provision for claimants, was accepted by the Robins board on Jan. 19. The board decided on AHP after also receiving sweetened offers from Rorer and Sanofi. The final Rorer bid may have offered a higher eventual value for shareholders than the AHP offer -- $ 750 mil. v. $ 700 mil. -- but offered less of an improvement for claimants. Rorer is keeping its bid for Robins on the table but recognizes that AHP "is in the driver's seat." "The American Home Products proposal best addresses our concerns and the committee therefore endorses it," claimants committee counsel Murray Drabkin said in a Jan. 19 joint press release from Robins and AHP. "The equity committee has enthusiastically reaffirmed its endorsement of the American Home Products plan, which now has the support of all the major parties, and looks forward to an expeditious plan confirmation," shareholder committee attorney Robert Miller stated. The revised American Home offer would provide either for a single payment of $ 2.375 bil. in cash upfront for Dalkon Shield claimants, or the sum of $ 2.475 bil. within one year of the plan's effective date. Aetna Casualty & Surety remains a participant in the AHP plan. An AHP/Robins merger would result in approximately $ 4.6 bil. in combined annual healthcare sales, based on projected 1987 sales released by the two firms. The AHP and Robins lines are complementary, especially in the OTC drug area (see chart, p. 5). Robins' Robitussin and Dimetapp brands would strengthen Whitehall Labs' cough/cold/allergy franchise based on the Dristan line. Whitehall is already a leader in the analgesic area with Anacin and Advil. Elkins-Sinn could also support AHP's tentative position in generic drugs. AHP has been very active in the OTC acquisition market, also purchasing the small contraceptive company VLI recently. The effort to increase its mass in the OTC market may represent an attempt to balance against a period of declines facing its Rx business. While AHP says it will maintain Robins Richmond business, consolidations are likely. AHP itself is going through a period of consolidation between Ayerst and Wyeth. With the decision to accept the AHP bid, the Robins board pre-empts a decision announced Jan. 2 to accept an offer from Sanofi. The agreement with Sanofi provided that Robins would pay the French firm $ 25-$ 50 mil. in "breakup" fees if it selects another suitor. That payment would be in addition to at least $ 25 mil. in breakup fees provided to Rorer under an earlier agreement. Chart omitted.

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