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Chiron rebuffs Novartis' bid



8 September,2005: Board members of Chiron Corporation have refused to accept the Swiss-giant Novartis AG's offer on September 1, 2005, to acquire the approximately 58% of Chiron shares that Novartis does not already own for $40 per Chiron share in cash.

Novartis already owns 42 per cent of Chiron, which had its flu vaccine production licence revoked in October last year after contamination problems were discovered at its Speke plant near Liverpool.

Chiron board members also spelled out that they had not solicited the Novartis bid. Details of a regulatory filing Novartis made to the US Securities and Exchange Commission (SEC) stated that the firm was approached by unidentified, independent Chiron board members and asked to help overcome `serious issues'.

"After thorough analysis and consideration of Novartis' offer to acquire the shares of Chiron it does not already own for $40 per share in cash, the independent directors of Chiron have determined that this offer is inadequate," the company said in a statement.

Novartis' offer came one day after the US Food and Drug Administration (FDA) issued a favourable inspection report on the Speke manufacturing facility. Chiron says it can start supplying the vaccine again by the 2005-2006 flu season.

With Novartis already the largest owner of Chiron, the chances of other potential buyers entering to stoke up a bidding war are remote.

Analysts gave a mixed reaction to the news. Some said they were not surprised at the rebuff as the offer only constituted a 10 per cent premium on Chiron's share price at the time of bidding and expected Novartis to come back with a sweetened bid.

Helvea analyst Andrew Fellows said the $40 a share offer values Chiron at $7.8bn, or 15 per cent above current market cap, which "appears to be a rich and full price".

Before its manufacturing problems, Chiron had been expected to generate annual sales of up to $400m from flu vaccines such as Fluvirin, but analyst estimates have now been shaved to $200m.


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