ICN’s Unusual Bond Offering Overseas Is Not Sitting Well With Ciba-Geigy

ICN Pharmaceuticals Inc. said Monday that it plans to raise $40 million through an unusual overseas sale of bonds that can be converted either into ICN common stock, or shares of Ciba-Geigy Ltd., a giant, Switzerland-based drugs and chemicals firm.

The offering, which Costa Mesa-based ICN expects to be complete by March 25, is not sitting well with Ciba-Geigy, however.

In a recent internal memo, Ciba-Geigy officials described the ICN move as “hostile” toward their company.

“We were not aware of ICN’s action before they did this,” said Mark Cheatham, a spokesman for Ciba-Geigy Corp., the company’s wholly owned U.S. subsidiary. “As far as Ciba-Geigy Ltd. is concerned, it’s not appreciated.”

The bonds are convertible after June 25 into either 200 ICN common shares, or two shares of Ciba-Geigy, which currently trades at about $2,133 a share on the Zurich exchange. If the bondholders prefer, they can exchange each bond for 100 ICN shares and one Ciba-Geigy share.

It was not immediately clear why ICN structured the bond offering in this way.

Richard Keatinge, an ICN attorney, said “that’s the way (ICN Chairman Milan) Panic wanted to set it up.” Keatinge added that because Ciba-Geigy is a leading industrial firm, its stock is “a good investment.”

But Craig Dickson, an analyst with Interstate Securities Corp., of Charlotte, N.C., said Ciba-Geigy stock is “more gilt-edged” than ICN stock and, therefore, the convertible bonds should be appealing to more conservative investors.

Though Ciba-Geigy is not happy with ICN’s bond offering, Cheatham said there appears to be little the company can do to thwart the move. At the present time, he added, no relationship exists between the two companies and none is likely.

Keatinge said ICN holds 15,000 Ciba-Geigy shares, which translates into a stake worth about $32 million. One Wall Street analyst, who asked not to be identified, estimated ICN’s stake at between 1% and 3% of Ciba-Geigy’s total outstanding shares.

$11.8 Billion in Revenues

Based on current exchange rates, Ciba-Geigy had worldwide revenues of about $11.8 billion during the 12 months ended May 31, 1985, the last period for which figures are available. Its domestic unit had $2.3 billion in revenues during the same period, Cheatham said. Earnings were not reported.

The ICN bond offering is the latest in a series of debt and stock sales by the company. It will augment an already impressive war chest that totals more than $427 million in cash and marketable securities. ICN has been amassing the funds for the acquisition of a large, worldwide drug distribution company.

The bonds will not be available in the United States, and none are to be sold to U.S. citizens, Keatinge said. ICN has applied for permission to trade the bonds on the Zurich, Geneva and Luxembourg stock exchanges, he added.

ICN common stock has been a volatile issue on Wall Street over the last year because its drug Virazole is considered a potential AIDS treatment. ICN closed Monday at $18.50 a share on the New York Stock Exchange. During the last year, it has traded for as high as $34 a share and for as low as $10.25 a share.