KG: Intentions Now Clear

It was just two weeks ago, in our analysis of second quarter results, that we remarked that King Pharmaceuticals, Inc. (NYSE: KG):

... had over $1 billion in Cash or equivalents on 30 June. The amount is far more than needed to meet current obligations. The company could be planning to reduce its debt or getting ready to make a large investment.

We now have a better understanding of King's intentions.

King Pharmaceuticals formally announced a $1.4 billion, all-cash offer to purchase all the shares of Alpharma, Inc. (NYSE: ALO). Alpharma immediately rejected the $33 per share offer as inadequate, despite a substantial premium over prior market value. The offer had apparently been made privately and rebuffed by Alpharma before King's announcement on Friday. Alpharma's latest response indicated a willingness to enter into negotiations leading to a higher offer.

It seems likely that King's interest in Alpharma was piqued by the latter's KADIAN and FLECTOR products for treating acute pain. King and Pain Therapeutics, Inc. (NASDAQ: PTIE) recently presented test results for the proposed REMOXY product to treat chronic pain.