updated 10/31/2005 7:35:12 AM ET 2005-10-31T12:35:12

Swiss pharmaceutical maker Novartis AG said Monday it has agreed to pay $5.1 billion for the remaining 58 percent of embattled biotechnology company Chiron Corp. that it doesn't already own.

Novartis, which had made an initial proposal last month that Chiron rejected, said it had made an improved offer to acquire the approximately 113 million Chiron shares it does not already own at $45 each in cash. Chiron is the second-largest vaccine supplier in the United States.

The offer represents a 23 percent premium over Chiron's closing price on Aug. 31, the last trading day before Novartis proposed buying the shares at $40 each, the Basel-based company said.

Chiron's board had called that offer "inadequate" but has recommended shareholders vote to approve the sweetened offer.

"Our plan is to turn around the Chiron vaccines business, which will require investments in R&D and manufacturing to increase quality and capacity, so that we can better meet customer demand and address public health needs," said Novartis Chairman and Chief Executive Daniel Vasella.

Last week, Chiron Corp. reported its third-quarter earnings nearly doubled to $51 million on revenue of $479.6 million. Most of the profit improvement was because at the same time last year the biotechnology company was caught up in a messy manufacturing problem that cost the United States nearly half of its expected 100 million flu-shot stockpile.

The Emeryville, Calif.-based company called the latest quarter a "turning point" because federal regulators have approved Chiron's first batches of flu shots, about 1.5 million, for delivery. The company offered no further guidance on how many flu shots it expects to deliver this year.

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