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Executive Summary

DEUTSCHE GELATINE FABRIKEN STEPPING IN TO STEADY SCHERER in the wake of the company's year-long family feud. The West German company's declared interest in the purchase of the capsule maker is the second rescue effort by the firm in a decade. Deutsche Gelatine Fabriken (DGF) disclosed in a 13-D filing with the Securities & Exchange Commission dated Feb. 6 that it has been talking to R. P. Scherer's investment banker in relation to Scherer's announced decision to consider buy-out or merger offers. DGF already owns 500,000 (or approximately 7%) of Scherer's outstanding stock. The DGF chief executive officer, Joerg Siebert, sits on the Scherer board; he is not participating in the review of merger offers. Ernst Schoepe, the current chairman of R. P. Scherer, was a managing director of DGF from 1966 to 1985. Scherer's investment banker is Goldman Sachs. The West German firm was the primary force behind the eviction of one family-led management group at Scherer in 1979. At that point, DGF was the minority partner of the company's West German affiliate. After a series of disagreements with the U.S. management group headed by R. P. Scherer, Jr., DGF sided with a new management group headed by Peter Fink, a brother-in-law to R. P. Scherer, Jr. Fink was president until being forced out in a dispute with his wife (Karla Scherer) in 1988. He has announced his intention to form an investment firm and has not ruled out an attempt to resume control of Scherer. The West German firm is stating its current intentions clearly in an apparent attempt to ward off other offers. "While DGF is maintaining its beneficial ownership of shares of common stock as an investment," the SEC filing states, "DGF plans to pursue its investigation of ]Scherer[ with the intention of making a definitive proposal to acquire all outstanding shares of common stock on a fully diluted basis." DGF declared that it has informed Goldman Sachs of its intent.

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