Tuesday, June 15, 2004

Omnicare takeover fight turns into war of words

By James McNair
The Cincinnati Enquirer

On the night of March 2, the chief executives of Omnicare and NeighborCare set aside their nursing home rivalry long enough to enjoy dinner together in Miami Beach.

Now, the civility between Omnicare CEO Joel Gemunder and NeighborCare CEO John Arlotta has devolved into mutual trash talking.

NeighborCare is the object of a hostile takeover attempt by Covington-based Omnicare. NeighborCare said Monday that its board of directors has voted to urge shareholders to spurn Omnicare's cash bid of $30 a share. It reiterated its earlier statement that the $1.31 billion offer fails to adequately value NeighborCare's shares and business prospects.

"This is nothing more than a blatantly opportunistic attempt by Omnicare to acquire NeighborCare at an inadequate price before the full impact of our new business plan and market opportunities is reflected in the company's results of operations and share price," Arlotta snapped.

Omnicare expressed disappointment in its rival's response, calling its refusal to discuss a merger "inconceivable." It also pointed to the risk of banking on the execution of NeighborCare's business plans.

"NeighborCare requires extremely aggressive assumptions in order to generate shareholder value comparable to the $30 per share in cash that Omnicare is offering today," Omnicare said in a statement.

NeighborCare's share price has risen 70 percent since Omnicare announced its offer on May 24. Omnicare said its $30 bid is $4 more than NeighborCare's all-time high of $26.05 on Feb. 27. It said the offer is 30 percent higher than NeighborCare's median 12-month share price estimate of investment analysts.

Investors pushed NeighborCare's share price to $30.85 Monday, up 34 cents. Omnicare closed at $41.35, down 69 cents.

Omnicare provides pharmacy services at nursing homes with 1.05 million beds in 47 states and the District of Columbia. In 2003, it posted net income of $194 million on sales of $3.5 billion.

NeighborCare, based in Baltimore, provides similar services at nursing homes with 255,990 beds in 27 states, including Ohio, Kentucky and Indiana, and retail pharmacies in four mid-Atlantic states. It reported $30 million in net earnings and $2.7 billion in revenue in its fiscal year ended Sept. 30.

NeighborCare said Monday that its financial adviser, Goldman Sachs & Co., declared Omnicare's offer inadequate to NeighborCare shareholders from a financial point of view.

Yet the New York Times reported Sunday that Goldman Sachs has been selling its clients' stock for months. Citing regulatory filings, the newspaper said Goldman Sachs' holdings in the company had fallen by more than 60 percent, to 1.3 million shares from 3.6 million shares, from Dec. 31 to March 31.


E-mail jmcnair@enquirer.com

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