CANYON PARK – Eli Lilly &Co. sweetened its offer for ICOS Corp. by $200 million on Monday, offering $34 a share in what now would become a $2.3 billion deal that would cost all 700 ICOS workers their jobs.
The boards of both companies had approved the earlier $2.1 billion offer and were expecting ICOS shareholders to vote on the acquisition today. But at least one major shareholder and an investment adviser had said the deal was much less than ICOS – the maker of the erectile dysfunction drug Cialis – is worth.
The new offer, a 6 percent increase, prompted ICOS to reschedule its shareholder vote for Jan. 25.
ICOS shares gained 50 cents, or 1.5 percent, to close at $33.85 on the Nasdaq stock market, while Lilly shares sank $1.29 or 2.4 percent, to close at $53.23 on the New York Stock Exchange.
While Proxy Governance Inc. advised shareholders to accept the offer, Institutional Shareholder Services and Glass Lewis &Co. said the deal should be rejected. In addition to the price, critics have also expressed unhappiness with the management compensation packages that are part of the deal. ICOS executives will receive payouts of nearly $68 million, including at least $23 million from bonuses and stock awards to ICOS Chairman and Chief Executive Paul Clark.
Jason Napodano, an analyst with Zacks Independent Research, said he wasn’t surprised that Lilly opted to up the ante in the deal because ICOS issued a bullish forecast on its prospects last week.
The drugmaker provided a preliminary earnings-per-share prediction of between 17 cents and 22 cents for the fourth quarter and projected earnings of between 33 cents a share and 38 cents a share for 2007.
Analysts surveyed by Thomson Financial had expected ICOS to earn 9 cents per share in final quarter of this year and 29 cents per share in 2007.
“They (ICOS) really pushed Lilly to pay more with that announcement,” Napodano said. “I think it (the deal) still makes sense.”
The deal would give Lilly full control of Cialis, which is expected to post $1.1 billion in sales next year. Lilly had earlier been partners with ICOS to market the drug.
If the deal goes through, all 700 employees at ICOS would lose their jobs, Lilly has said.
The Associated Press also contributed to this article.
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