t/o target? today's afr

Street Talk
Aug 26
Anthony Hughes with Eli Greenblat





Foreign players circle Mayne


It was perhaps inevitable that unloved health-care group Mayne would become subject to takeover advances this year, but the Peter Willcox-led Mayne board has told those international drug companies knocking on its door that it is not for sale. Not now anyway.



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Mayne rose another 5¢ to $3.96 yesterday, which supports the talk that as many as four companies - led by Novartis - have spoken to Mayne about taking over its international injectables pharmaceuticals operations and divesting the rump of other assets.

Mayne is understood to have spoken to corporate advisers about the "feelers" it has been getting from offshore drug companies - thought to include Novartis, Teva, Merck and Baxter - as well as private equity players that have lined up to take over Mayne's drug distribution and diagnostics operations.


All this explains why Mayne has been exhibiting all the tell-tale signs of being in takeover defence mode. In June, it put a higher valuation on itself than the market and earlier this month unveiled a surprise profit upgrade that analysts questioned the genuineness of.

Mayne managing director Stuart James has been so keen to focus the market's attention on the company's value that he found room for a 20per cent profit upgrade earlier this month, ahead of today's full-year results. Yesterday, Mayne won European approval for its formulation of cancer treatment paclitaxel.

Of course, this would be about the fifth time in three years it has been in serious takeover talks to no avail.

Analysts said some of the mooted buyers would be departing from their corporate strategy by buying Mayne. Novartis and Merck are innovative global drug companies previously thought to be not too interested in generic drugs. But for Swiss-based Novartis, this changed earlier this month when its Sandoz generics unit acquired Sabex, a Canadian generic injectables drug maker, for $US565million ($800million).

Teva had an offer to buy the old Fauldings injectables business for $US365 million, coinciding with Mayne's takeover of Faulding in 2001, but Mayne decided not to. Baxter has its own problems and is under new leadership.

Another observation is that Mayne clearly has a lot of cash on its balance sheet and probably needs to make its own generics acquisition to keep up with its international peers - but given its tortured history, the company's probably better off being taken out altogether.