published Tuesday, December 22nd, 2009

Magee: Chattem positioned to grow after sale to French drugmaker

Try telling the many Chattem stockholders in the Chattanooga area there's no money in the new economy.

They may beg to differ following Monday's announcement that Paris-based Sonafi-Aventis will extend an offer of $93.50 per share to buy the Chattanooga health care company.

Throughout most of last week, the publicly traded local company's stock price traded at just under $70 a share. Following the announcement, the price soared more than $22 a share, trading at just under $93.

Talk about an early Christmas present for shareholders, which include many of the company's more than 500 employees. The offer is 44 percent more than Chattem's average stock price over the past six months.

Most people are not questioning whether the Sonafi-Aventis offer is fair.

Instead, they want to know what the acquisition might mean for the future of Chattem in its hometown, since one company buying another often means dismantling at some level, with parts reassembled in other places.

It is one thing to understand that the French drugmaker, which has limited exposure in the United States, wants to pay a premium to acquire Chattem's strong consumer brands such as Selsun Blue shampoo and Gold Bond products.

It is another thing to believe Sonafi-Aventis won't take the proverbial best and leave the rest.

Often that's the case in corporate acquisitions, but in this deal Chattem is not the typical company being acquired. More than a collection of brands, Chattem is a lean company with many talented people who understand the U.S. market. Such leadership holds considerable value for Sonafi-Aventis.

That's why no line has formed yet by those wanting to challenge company chief executive Zan Guerry for his comments suggesting that the proposed acquisition will mean more jobs because larger competitors have had advantages in research and technology.

He's got a point, considering Chattem's top competitors include Johnson & Johnson and Procter & Gamble. Those companies are many times larger than Chattem in the number of employees, annual revenue and research-and-development dollars.

If the deal with Sonafi-Aventis goes through, Chattem should be well positioned to deliver additional solid returns in the community.

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