CETUS/CHIRON MERGER CAN PROCEED: ROCHE WILL ABIDE BY PCR ARBITRATION

CETUS/CHIRON MERGER CAN PROCEED: ROCHE WILL ABIDE BY PCR ARBITRATION between Kodak and Cetus as the result of a Dec. 3 Delaware chancery court decision. The court specified that Roche be bound by the arbitration as a condition to its denial of a Kodak motion for a preliminary injunction blocking the sale of Cetus' polymerase chain reaction technology to Roche. Roche has agreed to the court's decision provided that Kodak allow it to participate in the arbitration proceedings. The ruling will allow the Cetus/Chiron merger to proceed by providing for the completion of Cetus' sale of its PCR technology to Roche for $ 300 mil. plus future royalties that was a condition of the merger agreement announced July 22 ("The Pink Sheet" July 29, p. 16). Cetus and Chiron shareholders are scheduled to meet Dec. 10 to vote on the proposed sale and merger. The value of Chiron shares has been put at $ 66.75 per share for the merger. Under terms of the deal, Cetus shareholders are to receive 0.3 shares of Chiron stock in exchange for each share of Cetus stock. There are currently 33.8 mil. shares of Cetus stock outstanding, putting the value of the stock swap at $ 676 mil. and the value of Cetus' therapeutics business at about $ 376 mil. Kodak filed for the preliminary injunction Aug. 12 following the July 22 merger announcement. The suit asked that the proposed sale of the PCR technology be enjoined until the conclusion of a pending arbitration proceeding between Kodak and Cetus over rights to certain PCR technology. The arbitration, filed for by Kodak in April, seeks to resolve a dispute between the two firms over the extent of Kodak's rights to PCR products/technology under a 1986 R&D pact for in vitro diagnostics that was terminated by Cetus in February 1989. The San Francisco office of the American Arbitration Association has been asked to settle the dispute. A panel and hearing date have yet to be determined. Just prior to terminating its R&D agreement with Kodak in February 1989, Cetus signed a five-year agreement with Roche to develop and commercialize PCR-based in vitro human diagnostic products. Kodak, concerned that the Roche deal would conflict with rights it retained under its agreement with Cetus, met with Roche "intermittently" after the Roche/Cetus deal was forged "in an effort to reach an agreement as to the meaning and scope of the Kodak-Cetus agreement," the Dec. 3 ruling notes. When agreement could not be reached, Kodak filed for the arbitration at the suggestion of Roche. The newly-merged company's office of the chairman will consist of a troika, not a quartet as originally had been outlined in the merger agreement, following the Nov. 25 announcement that Chiron's current President and Chief Operating Officer Gregory Lawless is leaving. The three-man office of chairman will consist of Chiron Chairman William Rutter, PhD, Chiron CEO Edward Penhoet, PhD, and Cetus President and Chief Operating Officer Hollings Renton, all of whom will continue in their respective roles. Lawless will pursue "other opportunities but will be available to assist in the transition and intergration of the two companies." He was Chiron's president for two-and-one-half years.