Share buyback likely for Procter & Gamble; Charlotte Russe takes deal; Highpine stock rises

By Cristal Cody

Tupelo, Miss., Aug. 24 - Shares of Warner Chilcott Ltd. climbed 27.09% on Monday after parent company Warner Chilcott plc said it will buy Procter & Gamble Co.'s global pharmaceuticals business for $3.1 billion in cash.

Meanwhile, shares of Charlotte Russe Holding, Inc. jumped 25.89% on news Monday that the retailer had struck a deal to go private for $380 million in cash. No other bidders are expected for the young women's clothing retailer, an analyst said Monday.

In other situations, Highpine Oil & Gas Ltd. shareholders are expected to approve the company's C$530 million takeover by Daylight Resources Trust Ltd., an analyst told Prospect News.

On Wall Street, stocks were mixed.

The Dow Jones Industrial Average rose 3.32 points, or 0.03%, to close at 9,509.28.

The Standard & Poor's 500 index fell 0.56 of a point, or 0.05%, to 1,025.57, while the Nasdaq Composite index slipped 2.92 points, or 0.14%, to 2,017.98.

Procter & Gamble dumps pharmaceuticals

Ardee, Ireland-based drug maker Warner Chilcott will acquire Procter & Gamble's portfolio of branded pharmaceutical products, which includes Asacol HD delayed-release tablets for ulcerative colitis and Actonel for osteoporosis, along with prescription drug manufacturing facilities in Puerto Rico and Germany.

The companies expect the transaction to close by Nov. 1.

The sale will result in a one-time earnings increase for Procter & Gamble of about $1.4 billion, or 44 cents per share.

"The cash generated improves our overall cash [position], but we're not going to distinguish between cash sources," Procter & Gamble's chief financial officer, Jon R. Moeller, said on a conference call with analysts on Monday. "The first use of cash will be utilized to fund our business and dividends."

Moeller said the funds also could be used later in the year to buy back outstanding stock.

Whether the company would use any funds for other deals remains unclear.

"It's possible," an analyst told Prospect News on Monday. "I think we will see them start buying back shares."

Bob McDonald, president and chief executive officer of Procter & Gamble, said the move "enables us to focus singularly on winning in consumer health care - personal health care, oral care and feminine care."

Cincinnati-based Procter & Gamble's health products include Crest, Metamucil, Pepto-Bismol, Scope as well as consumer brands such as Bounty, Charmin and Gillette.

Warner Chilcott intends to finance the acquisition with debt proceeds and has received commitments from a group of lenders to provide senior secured debt facilities and a senior unsecured bridge facility.

"The acquisition of the P&G pharmaceutical brands and employee talent is a transformational, strategic move for us," Roger Boissonneault, president and CEO of Warner Chilcott, said in a statement. "The acquisition transforms Warner Chilcott into a global pharmaceutical company."

The deal expands Warner Chilcott's presence in existing specialty pharmaceutical markets in 14 countries. Procter & Gamble's pharmaceuticals business had preliminary revenues of $2.3 billion and income of $540 million for the year ended June 30.

Shares of Warner Chilcott's U.S.-listed subsidiary added $4.35, or 27.09%, to close at $20.41.

Procter & Gamble shares fell 24 cents, or 0.45%, to close at $53.34 on Monday.

Charlotte Russe moves on up

Charlotte Russe said it will be taken private for $17.50 a share in a tender offer by an affiliate of private equity firm Advent International Corp.

"After careful consideration of a full range of strategic alternatives, including an extensive, publicly announced sale process, we are pleased to have reached this agreement with Advent, which creates substantial value for our stockholders," Jennifer Salopek, chairman of Charlotte Russe, said in a statement.

The offer represents a premium of 26.90% over Charlotte Russe's closing stock price of $13.79 on Friday and 255.00% over Charlotte Russe's closing stock price on Jan. 21, when the company announced it was conducting a strategic alternatives process.

The retailer announced in March it would look for a buyer.

Charlotte Russe said the deal is subject to customary closing conditions. No regulatory issues are expected, a spokesman told Prospect News on Monday.

The mall-based retailer rejected a buyout offer of $9.00 to $9.50 a share last year from KarpReilly LLC founder Allan Karp and H.I.G. Capital, LLC.

Pali Capital Inc. analyst Amy Noblin said Monday in a research note that no other bidders are expected to emerge.

Charlotte Russe "does not have a concentrated shareholder base and therefore, we do not expect there to be any issues related to the successful completion of the tender offer," Noblin said. "In addition, we think it is reasonable to assume that the deal has been thoroughly shopped since the sale process was announced in March and therefore, we think it is unlikely there will be a competing offer."

San Diego-based Charlotte Russe was founded in 1975 and features products for young women in 501 stores in 45 states and Puerto Rico.

Advent, which has a focus on retail investments, said it has funded 25 retail businesses that include European fashion discounter Takko.

Shares of Charlotte Russe closed up $3.57, or 25.89%, at $17.36 on Monday. The stock has traded from $3.98 to $17.40 over the past year.

Daylight pumped over gas buy

Under the terms of the merger announced over the weekend, Highpine shareholders will receive C$7.00 in cash per share or 0.85 of a Daylight trust unit.

The deal includes the assumption of Highpine's debt.

Calgary, Alta.-based Daylight said the combined company should produce about 38,000 estimated barrels of oil a day through the end of the year.

The takeover is expected to close by late October. The deal includes a C$20 million termination fee.

Highpine shareholders are expected to approve the offer. Highpine's board and executives have agreed to vote their 9.50% of shares in favor of the offer.

"Deals in Canada are rarely voted against," Cristina Lopez, an analyst with Tristone Capital Inc., said in an interview Monday.

Daylight's acquisition of the Calgary, Alta.-based oil and gas explorer is a good deal that will be accretive to earnings, she said.

"It allows them additional cash for next year to help fund distributions to shareholders," Lopez said.

Highpine shares jumped 18.23% to close up C$1.03 at C$6.68 on Monday.

Daylight's units closed down C$0.08, or 0.98%, at C$8.05.

Mentioned in this article:

Charlotte Russe Holding, Inc. Nasdaq: CHIC

Daylight Resources Trust Ltd. Toronto: DAY-UN

Highpine Oil & Gas Ltd. Toronto: HPX

Procter & Gamble Co. NYSE: PG

Warner Chilcott Ltd. Nasdaq: WCRX

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