Summary
1.
Almost every aspect of the complexity of the merger can be explained through Rhône-Poulenc’s financial constraints. RP’s motives to acquire Rorer were to create crucial capital for its own strategic entry into pharmaceuticals. RP could not buy Rorer either in cash or shares due to the following factors:
First, RP had limited ability to pay with borrowed cash. The company was more levered than other firms in the industry. Rhône-Poulenc didn’t want to borrow all the cash because it would have affected in a negative way to its balance sheet despite the fact that it borrowed for the cash portion of the deal.
Second, Rhône-Poulenc couldn’t pay with internally generated cash because, during the announcement time, RP was a net cash …show more content…

The markets expected RP to slowly take over the company because it owned 68% of RPR’s shares.
The French government owned 100% of Rhône-Poulenc’s voting common stock. RP was the seventh largest chemical manufacturer in the world and it gave the minority shareholders a contingent value right (CVR) that promised to pay them on July 31, 1993, any shortfall between $49.13 and the then prevailing stock price.
Rorer Goup, Inc’s main factor in its growth strategy had been a program of acquisitions, because sales growth in the company’s existing product lines was characterized as mature.
As usual, there were several skeptics associated to this merger. They were worried about the cultural integration and independence. The skeptics pointed out the company is French, yet the management team is mainly American, they have a American-style mission statement (“Our Mission is to become the BEST pharmaceutical company in the world by dedicating our resources, our talents, and our energies to help improve human health and the quality of life of people throughout the world”) and the lack of interest of the American executives to learn French.
The market outlook for the industry wasn’t favorable for the company. The cost of new-product development in the industry was rising and yet the number of new drug applications worldwide had fallen. It was also predicted that the governments would get tougher on the cost of drugs in an effort to slow