Bayer as Buyer

A war over Alka-Seltzer?

Bayer AG, the huge West German chemical firm, is best known in the U.S. for a product it has not owned for 60 years: its American rights to the name and trademark of Bayer aspirin were confiscated during World War I and thereafter given to Sterling Drug. Since the '50s, Bayer (pronounced Buyer in Germany) has been getting back into the U.S. market acquiring Mobay Chemical of Pittsburgh and Cutter Laboratories of Berkeley, Calif., but it has never regained a significant position in U.S. consumer drugs. Last week it moved to do so, by offering "at least" $40 a share for a controlling interest in Miles Laboratories, Elkhart Ind.-based maker of Alka-Seltzer and One-a-Day vitamins. If Bayer bought all 5.4 million Miles shares, the purchase would swallow $216 million of the $500 million that Bayer has pledged to invest in the U.S. during the next five years.

Directors of Miles, which is dominated by three founding families, said they would consider the bid--but added teasingly that they are also weighing unofficial proposals from other, unidentified suitors, also said to be European. Wall Street scented the prospect of a profitable bidding war, and arbitragers (professional traders) bought so much stock that Miles shares jumped from around $29 before the proposal to more than $42; last Friday it closed at $40 3/4.

Miles is an obvious takeover target. Since 1972 its sales have grown from $316 million to $450 million, but profits have increased only from $15 million to $16.2 million. Acquisition of Miles would raise Bayer's American sales to around $1 billion a year (worldwide sales last year were $8.3 billion, and profits $181 million). But Bayer officials say that though they may go higher than their opening $40-a-share offer, they have no intention of getting into a long battle for Miles--and besides Washington trustbusters are examining whether the acquisition would violate antitrust laws. Should they oppose the takeover, the traders who have grabbed up Miles stock may need some of Alka-Seltzer's plop, plop, fizz, fizz relief.

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