SCHERER TAKING PACO PUBLIC IN PROPOSED $35 MIL. OFFERING
SCHERER TAKING PACO PUBLIC IN PROPOSED $35 MIL. OFFERING, according to a preliminary registration statement filed with the Securities and Exchange Commission on June 19. The public offering represents the third attempt by R.P. Scherer to divest the contract manufacturing firm. A 1990 deal to sell Paco to its management for about $40 mil. fell through. More recently, a $40 mil. proposed sale to Galen also was abandoned ("The Pink Sheet" Feb. 24, T&G-2, and March 30, In Brief). Scherer acquired Paco (then a public company) for about $64 mil. in 1988. Following a leveraged buyout in October 1989, Scherer decided to focus on its specialized drug delivery business and to divest other holdings, including Paco. After the first attempted sale fell through, Scherer recorded Paco as a discontinued operation. Scherer itself went public again in late 1991 ("The Pink Sheet" Sept. 9, 1991, p. 11). Most of the proceeds will go to Scherer. If the sale goes through at the proposed price of $11 per share for 3.5 mil. shares, Scherer would receive $31.3 mil. and retain 1,000 shares of common stock, the prospectus says. Paco intends to use the first $4 mil. of proceeds from the offering to reduce its bank debt, and the remainder will go to repay an "intercompany promissory note of Paco held by Scherer." The amount owed Scherer totals $38.4 mil.; however, any "remaining outstanding principal balance of the Intercompany Note will be contributed to the capital account of Paco," the prospectus says. The offering is being underwritten by Lehman Brothers (majority owners of Scherer), PaineWebber and Wertheim Schroder & Co. Paco reported net sales of $69.9 mil. (up 35%) for the year ended March 31 and a net loss of $15.9 mil. With pro forma adjustments for debt elimination, Paco would have reported a profit of $3.6 mil., the prospectus says. For future growth, Paco is targeting biotechnology and mail order pharmacies where it believes it can be "a cost-efficient packaging alternative." When the Galen agreement was terminated in March, no reason was given. The prospectus discloses that the acquisition company formed by Galen, Ocap, has filed a breach-of-contract suit in the New York State Supreme Court against Paco and Scherer. The complaint seeks $75 mil. in actual damages, $100 mil. in punitive damages and attorney's fees. Scherer has indemnified Paco against any liability in the case. "The company believes that this action lacks merit," the prospectus says. Scherer has filed a motion to dismiss which is scheduled to be argued in June.
You may also be interested in...
Newly released Medicare Part D data sheds light on the sales hit that branded pharmaceutical manufacturers will face when the coverage gap discount program gets under way in 2011
FDA appears headed for a showdown with clinicians and the pharmaceutical industry over the proposed new clinical trial endpoints for acute bacterial skin and skin structure infections, the guidance's approach for justifying a non-inferiority margin and proposed changes in the types of patients that should be enrolled in trials
Specialty drug maker Shire has quietly begun scouting deals with a brand-new $50 million venture fund, the latest of several in-house investment arms to launch with their parent company's pipelines, not profits, as the measure of their worth