By Toni Clarke

King's offer of $37 a share has been accepted by Alpharma's board and represents a premium of 10.4 percent over Alpharma's closing share price on Friday of $33.50.

Alpharma's shares jumped 6.3 percent, while King's shares rose nearly 8 percent.

The agreement, if approved by shareholders, will give King Alpharma's pain drug Kadian and pain patch Flector, in addition to drugs to treat animals.

It also gives King Alpharma's experimental pain drug Embeda, which, together with its own experimental pain drug Remoxy, could boost its competitiveness in the race to discover painkillers that cannot be abused.

"We believe this deal is a no-brainer for King, as it not only provides increased revenue diversification with the animal health cash-cow, but more importantly positions King to be the leading company in the promising abuse-deterrent opioid market," said Corey Davis, an analyst at Natixis Bleichroeder.

DRUG DEALS GETTING DONE

The deal comes as drugmakers try to take advantage of the credit crunch and the declining values of many smaller companies -- particularly biotechnology companies.

Johnson & Johnson announced on Monday it has agreed to acquire Israel's Omrix Biopharmaceuticals for about $438 million in cash to expand its line of products used to control bleeding during surgery.

The $25-per-share deal represents a 18.1 percent premium to Omrix' Friday close of $21.16 on the New York Stock Exchange.

Earlier this month an advisory panel to the U.S. Food and Drug Administration said Alpharma's morphine-based Embeda is somewhat less attractive to drug abusers, a potential marketing boon if the agency allows the company to include such a claim on its label.

The FDA is also weighing whether to approve Remoxy, a similar product from King and partner Pain Therapeutics Inc . The advisory panel said Remoxy also appeared less susceptible to abuse than other similar drugs such as Purdue Pharma's Oxycontin.

Bristol, Tennessee-based King, which makes the blood pressure drug Altace and muscle relaxant Skelaxin, originally offered $33 a share for Alpharma, but later sweetened the bid after Alpharma resisted.

The $37 a share offer represents a premium of 54 percent over Alpharma's closing price of $24.04 the day before King's first offer on August 22.

King generated revenue of $2.7 billion last year, while Alpharma, based in Bridgewater, New Jersey, had revenue of $722 million. King has more than $1.2 billion in cash, while Alpharma has $600 million in cash and $300 million in debt.

King said it expects the transaction to add to its earnings per share, excluding one-time items, in the second full year following completion of the transaction. It expects the deal to close by the end of this year.

King said it expects to achieve cost savings of $50 million to $70 million over the same period, mainly derived from general and administrative cost cuts and research and development savings achieved by avoiding the expense of new sales representatives for the launch of their new pain drug.

Credit Suisse and Wachovia Securities are acting as financial advisers to King. Banc of America Securities LLC is advising Alpharma.

Shares of Alpharma rose $2.05, or 6.1 percent, to $35.55 on the New York Stock Exchange near midday. Shares of King rose 63 cents, or 7.3 percent, to $9.25, off an earlier high at $9.45.

Shares of Omrix rose $3.42, or 16.16 percent, to $24.58 on the Nasdaq. J&J shares rose 59 cents, or 1.01 percent, to $58.94.

(Reporting by Toni Clarke, Susan Kelly, editing by Dave Zimmerman and Matthew Lewis)