Rorer Converts-Poulenc Case Study

INTRODUCTION
The latter decade of the 20th century brought a number of major innovations to the pharmaceutical industry, most notably a remarkable wave of successful joint ventures and mergers between big and medium players in the market.
In this case study we analyzed the Rorer and Rhône-Poulenc (RP) merger in July 31, 1990 that created a major multinational company: the Rhône-Poulenc Rorer, Inc. (RPR), where the RP became the majority shareholder, owning 68 percent of the RPR’s shares.
Prior to the merger, Rorer lacked the resources to access the European market, and the firm presented relatively low cash balance and rising debt which, according to financial analysts, appeared to be handicapping its strategy of growth by acquisitions. On the other hand, RP’s Human

CVRs have long been used not only in mergers in the pharmaceutical industries, but also in other industries and in different cases. For instance, in June 1998, the German insurer Allianz, when taking over Assuarances Generales de France (AGF), issued CVRs to the shareholders of AGF aiming at discouraging them from offering their shares for AGF. In fact, by doing this, Allianz was using a defensive CVR. Note that there are two types of CVRs – defensive and attractive. Contrarily to the defensive, in the attractive CVR the bidder tries to encourage shareholders of the target company to tender their shares. Therefore, Allianz, by using the CVR, was trying to keep a part of total AGF’s shares as free float without incurring in the cost of purchasing a massive amount of stocks. In this CVR, Allianz was combining two exotic put options: a down-and-in and a down-and-out puts. This combination would guarantee the target shareholder with a minimum payoff at the exercise date, and the bidder Allianz with the advantage of limiting its cash outlay at the time of the