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Executive Summary

MONTEDISON ACQUIRING REMAINING ERBAMONT SHARES FOR $459 MIL., or $37 per share. Under a definitive agreement announced Oct. 27, Montedison SpA has agreed to a three-stage acquisition of the anticancer chemotherapy products firm. The first stage will involve a $37 per share cash tender offer for the approximately 28% of Erbamont it does not already own. Based on the 44.3 mil. shares outstanding, Montedison will pay nearly $459 mil. for the remaining 12.4 mil. shares controlled by outsiders and is valuing Erbamont at approximately $1.6 bil. In the week prior to the announcement of the definitive agreement, Erbamont was trading in the $35 per share range. The definitive agreement was unanimously approved by a special committee of Erbamont directors unaffiliated with Montedison who were assembled in July to study the Italian firm's initial proposal to take Erbamont private. Bear Stearns advised the special committee. Montedison's financial advisor is Wertheim Schroder, which will also act as dealer manager for the tender offer. The offer is slated to commence the first week of November. Montedison also announced that it has reached an agreement-in-principle to settle shareholder lawsuits relating to its July proposal. The settlement, which is subject to judicial approval, will be sought "promptly," the firm said. In July, Montedison concurrently offered to buy the minority stake of Himont, its Wilmington, Delaware-based petrochemical and plastics affiliate. At the time, the international chemical company said the "primary reason" for the offers was "to enhance its ability and flexibility to compete more effectively in the increasingly global markets." A Himont directors special committee recently rejected the $47 a share offer as inadequate and is currently in negotiations with Montedison. Stamford, Connecticut-based Erbamont is in the process of finding successors to its dominant anticancer product, Adriamycin (doxorubicin), with two second generation anthracyclines -- idorubicin I.V., an antileukemic agent, and Pharmorubicin (epirubicin), an antineoplastic. The company told analysts in June that it would file the NDA for idorubicin before the end of 1989 and planned an early 1990 NDA filing for epirubicin ("The Pink Sheet" June 5, p. 9). The second and third steps of the acquisition will be the sale of all Erbamont assets followed by the firm's liquidation. In the liquidation, any remaining shareholders who did not tender their shares to Montedison will receive $37 per share. The structure of the acquisition is tripartite because the law of the Netherlands Antilles, where Erbamont is incorporated, does not recognize merger transactions, the firm explained.

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