American Home Products (AHP - Get Report) said Wednesday it plans to reduce its majority stake in Immunex (IMNX), a top biotech company based in Seattle, in a move that could raise up to $2.7 billion.
But American Home denied that the move, which could cut its stake to 43% from 55%, was aimed at raising money to pay for rising costs to settle
American Home said last month it may have to boost its reserves, currently about $3.3 billion, by "less than $5 billion" to pay for litigation from two diet drugs that were withdrawn in 1997. Analysts speculated the company could need as much as $3 billion more.
Lowell Weiner, a company spokesman, says the company is flush with cash. He says American Home will use the money from the Immunex stake sale to boost research and development and to fund other corporate purposes. The company recently got $1.8 billion as a merger breakup fee from its broken deal with Warner-Lambert, and an added $3.8 billion from the sale of its agrochemicals division."We don't need this cash to handle litigation," Weiner says. "We're confident the cost is manageable from existing resources." He says the company simply wanted to "monetize" stock gains from Immunex. American Home said it plans to sell up to 50 million Immunex shares in a secondary offering, "market conditions permitting." Separately, Immunex said it filed to sell up to 20 million new Immunex shares.