Moore Medical's Performance Sparks Acquisition Battle

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Moore Medical Corp. is hot, and that's not just a reference to its soaring stock price.

The marketer and distributor of medical, surgical and pharmaceutical products to non-hospital settings saw its stock rise 111.94 percent from Dec. 29 to Jan. 27, skyrocketing from $6.95 to $14.73. It had reached its 52-week low of $5.61 on Oct. 7, 2003.

Also, the New Britain, CT, company became an attractive candidate for purchase.

McKesson Corp., a distributor of surgical supplies and pharmaceuticals, agreed Jan. 19 to acquire Moore Medical. McKesson, San Francisco, would pay $12 per share in cash for each outstanding share of Moore Medical, or about $40 million. The deal was to close in the second quarter.

But investment firm SJ Strategic Investments LLC, Bristol, TN, has other ideas.

In an SEC filing, it reported a 9.8 percent ownership position in Moore as well as its intent to acquire the company. The filing mentioned:

· A Nov. 5, 2003, letter from SJSI to Moore president/CEO Linda M. Autore offering $10 per share for all outstanding common stock. A Nov. 10 letter to SJSI advised it that Moore had no interest in a transaction with SJSI, which reiterated its offer in a Nov. 13 letter to Moore.

· SJSI raised its offer to $12.50 per share Dec. 15 and expressed the possibility of increasing the offer further.

· A Jan. 14 meeting at Moore's headquarters to discuss the offer gave no indication "that SJSI's offer of $12.50 was being rejected ... ."

· SJSI sent another letter Jan. 21, increasing its offer to $15 per share. SJSI advised that a written response must be received by 5 p.m. (ET) Jan. 30.

The developments led to Moore's Jan. 29 announcement that it entered into a confidentiality agreement with SJSI that will provide it with access to due diligence information.

"The decision to enter into a confidentiality agreement with [SJSI] ... does not constitute a termination of the McKesson agreement," according to Moore's Jan. 29 statement. "There can be no assurance that [SJSI] will make an unconditional offer to acquire [Moore]. If such an unconditional offer is made, the Moore Medical board will consider it consistent with its obligations under the McKesson agreement and applicable law."

Larry Kurtz, vice president of investor relations at McKesson Corp., said Jan. 28 that his company had been in discussions with Moore for several months.

"We're just waiting to see what their board's response will be," he said. "You would always like your bid to be the only bid."

When asked about the possibility of his company raising its bid, Kurtz said it would be inappropriate to comment.

"We have 500 salespeople calling on physicians' offices," he said. "We call on mid- to large-size [practices] with 10 physicians on up, selling medical/surgical supplies into their offices. Moore sells the same product lines into small physicians' offices, with one, two or three physicians in them -- the more fragmented part of the market that is hard for us to reach.

"It's a good fit for us. There are clearly potential synergies on the expense side that we would be implementing."

Moore uses direct mail, telephone support staff, field sales representatives, customer community affiliates and the Internet.

A call to Autore was not returned.

In other news, Thane International replaces TeleSpectrum Worldwide based on inactivity in TeleSpectrum's stock.


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