Adams Respiratory Soars on Acquisition

Shares of over-the-counter drug maker Adams Respiratory Therapeutics Inc. soared to an all-time high Monday, after Britain's Reckitt Benckiser Group PLC said it will buy the Mucinex maker for $2.3 billion in cash.

Reckitt Benckiser, which makes Lysol disinfectant and Woolite laundry detergent, will pay $60 per share for Chester, N.J.-based Adams, which represents a 37 percent premium to the stock's $43.68 closing price on Friday.

Adams's stock skyrocketed $15.62, or 35.8 percent, to close at $59.30 Monday on 10 times average volume. Shares of the company, which went public in 2005, previously ranged between $27.25 and $46.67 over the past year.

Adams develops and markets cold and cough remedies for the prescription and OTC markets, including Mucinex and Delsym.

In a note to clients, RBC Capital Markets analyst Ken Trbovich maintained an "Outperform" rating on Adams with a $60 price target. He noted that Reckitt plans to launch its tender offer for Adams' shares in the next 20 business days and expects to complete the offer by January or February 2008.

"Based on Reckitt's intention to use its existing cash and credit facilities to complete the offer, we don't see any difficulty for Reckitt to complete the deal in this time frame," Trbovich said.

He said the deal places a substantial premium on Adams' over-the-counter business compared with previous acquisitions in this space, including Johnson & Johnson's deal to acquire Pfizer's consumer health business.

"As a result, we think it is unlikely that Adams will receive a premium offer to the existing deal offered by Reckitt," said Trbovich.