And this one:
Mountain View, California, Aug. 3 (Bloomberg) -- Catalytica Inc. investors and analysts on a conference call voiced dismay about the company's merger agreement with DSM NV for about $800 million, a price they said granted little premium over the company's recent market value.
Shares of Catalytica, which produces so-called fine chemicals used to make drugs, fell 5/8, or 5 percent, to 11 3/4 in trading on the Nasdaq Stock Market. The shares closed at 12 3/8 yesterday, giving the company a market value of $720 million.
DSM will pay about $750 million in cash and assume about $50 million in debt to buy the operations of Catalytica. That price is low, considering the premiums paid recently for other fine- chemical makers and Catalytica's own projections earlier this year for long-term growth, some analysts said.
``They have some crown jewels for assets, and we believe they deserve a higher premium,'' said John Froley, an analyst at First Security Van Kasper who has a `hold'' rating on the stock. ``We don't see the value for shareholders.''
For example, France's Rhodia SA, the biggest maker of ingredients in aspirin, agreed July 24 to buy U.S. fine-chemical maker ChiRex Inc. for $545 million in cash and debt. That was a 55 percent premium on the closing price of ChiRex shares, the day before the takeover was announced.
Mountain View, California-based Catalytica said that with consolidation in the industry, it needed to grow to remain competitive, and that the transaction would provide value for shareholders when it is complete.
Interest in Fine Chemicals
Still, the value of fine-chemical producers has increased as pharmaceutical companies increasingly look to outside suppliers for raw materials and manufacturing.
``There's a lot of interest in this area, and Catalytica is relatively undervalued in this deal,'' said Chris Crooks, analyst at Janney Montgomery Scott in Philadelphia. ``Under an auction process, they would have gotten a better price.''
On the conference call, investors and analysts also raised concern about a possible conflict of interest. Morgan Stanley Capital Partners III LP is one of the company's biggest shareholders, with about 32 percent of Catalytica's voting stock, and Morgan Stanley & Co. advised Catalytica on the transaction.
Catalytica said there was no conflict of interest, and that it had also hired Credit Suisse First Boston Corp. to provide independent analysis.
Netherlands-based DSM plans to keep Catalytica's drug division and spin off the Combustion Systems and Advanced Technologies units. Catalytica investors will gain stock in the new business and be paid between $9 and $10 per share, depending on taxes associated with the spinoff, Catalytica said.
Pharmaceuticals made up more than 99 percent of Catalytica's $423.7 million in revenue last year, said Catalytica spokeswoman Jackie Cossmon.
Catalytica had 58 million shares outstanding as of May 7, according to regulatory documents.
Analysts said the full value of the transaction will be clearer when the companies release regulatory filings detailing the merger. That's expected in 30 to 40 days.
``This is a surprise, and a lot of issues need to be fleshed out,'' said First Security Van Kasper's Froley. ``We'll know a lot more after the filing.''
Aug/03/2000 16:45 ET
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