Johnson Matthey agrees £147m bid for Meconic

Johnson Matthey, the cash-rich speciality chemicals and precious metals group, yesterday launched an agreed £147m takeover offer for Meconic in an attempt to expand its existing business that makes fine chemicals for the pharmaceutical industry.

The bidder has offered 405p a share cash for Britain's only licensed narcotics producer, a 42 per cent premium to Meconic's share price before the bid was made public. Shares in Meconic shot up 115p to 400p after Johnson Matthey bought a 38 per cent stake in the market. The company, best known for its development of environmentally friendly fuel-cell technology and catalytic converters, retreated 4p to 1,075p.

The company in effect put itself up for sale in March after it received a number of takeover approaches and appointed the corporate finance specialist Close Brothers to establish the level of interest from trade buyers.

Meconic is the parent company of Edinburgh-based Macfarlan Smith, which makes active pharmaceutical ingredients and fine chemicals and is a world leader in producing alkaloid opiates and other controlled drugs. The company was formed in 1990 after a management buyout of Macfarlan Smith from Glaxo.

It extracts morphine from poppy straw to produce codeine, morphine, cocaine and other opiates. The company also makes Bitrex, which is used to deter people and animals from ingesting hazardous materials such as bleach.

Peter Savage, the chairman of Meconic, said: "It would probably take several years for Meconic's share price to match that currently represented by the offer and the board has therefore concluded that the offer represents fair value for Meconic shareholders."

The company has had a troubled recent history. After floating in 1995 at 135p the share price soared to 420p in two years but has collapsed following three profit warnings.

Yesterday Mr Savage was confident the company was recovering and had strong prospects after pre-tax profits increased 21 per cent to £9.8m in the year to April 30 on turnover up 2.5 per cent to £62.8m. Johnson Matthey believes the deal will enhance earnings in the year beginning April 2002, the first full year of ownership.

Johnson Matthey already operates a pharmaceutical materials business at West Deptford in New Jersey, America. John Sheldrick, the finance director, said the division is similar to Meconic with complementary product ranges and a focus on high-value, low-volume products including opiates and other controlled substances. Mr Sheldrick said Johnson Matthey has been interested in buying Meconic for some time but said the two businesses were not in talks early last year when the stock market was awash with rumours a deal had been struck.

Chris Clark, the chief executive of Johnson Matthey, said the deal would "expand our product portfolio while extending our geographical reach and presenting broader market opportunities". Ken Green, Meconic's chief executive, has indicated he would be willing to stay on if the takeover is successful.

Meconic will pay Johnson Matthey £1.47m if its directors recommend a rival offer that is successful, unless Johnson Matthey's offer has lapsed or been withdrawn.