GSK buys HGS for $3.00 billion
World News | July 16, 2012|
The rumours were right and GlaxoSmithKline has won the day to acquire Human Genome Sciences, raising its original offer by $1.25 to $14.25 per share.
The transaction values HGS at $3.60 billion on an equity basis, or $3.00 billion net of cash and debt, and represents a premium of 99% to the HGS closing price of $7.17 per share on April 18. That was the last day of trading before HGS publicly disclosed GSK's initial private offer of $13 per share, or $2.60 billion, which was repeatedly rejected by the US biotech's board.
The deal means that GSK gets complete ownership of the lupus drug Benlysta (belimumab), plus the late-stage cardiovascular treatment darapladib and albiglutide, currently in Phase III for type 2 diabetes. The UK-based major says it expects to achieve at least $200 million in cost synergies to be fully realised by 2015, and the transaction should be accretive to core earnings beginning in 2013.
GSK chief executive Sir Andrew Witty said: "we are pleased to have reached a mutually beneficial agreement with HGS on friendly terms". He added that the combination "represents clear financial and strategic logic for both companies and our respective shareholders", claiming that "this is a natural next step in our nearly 20-year relationship with HGS".
His counterpart at HGS, Thomas Watkins, said that "after a thorough analysis of strategic alternatives", a combination with GSK "is the best course of action for our company and the best way to maximise value for our stockholders". He added that "we look forward to working with GSK to ensure a seamless transition".
Most observers believe that GSK has picked up HGS for a very reasonable price but no other offers were forthcoming. The former noted that it assessed the potential returns of this acquisition relative to its long-term share buyback programme and continues to expect to repurchase £2-2.5 billion in shares in 2012.
GSK to acquire Human Genome Sciences for US$14.25 per share in cash>
press announcement Issued: Monday 16 July 2012, London UK
GSK to acquire full ownership of BENLYSTA®, albiglutide and darapladib. Acquisition will be accretive to GSK core earnings in 2013. Tender offer amended to US$14.25 per share and extended until 27 July 2012
GlaxoSmithKline plc (LSE: GSK) and Human Genome Sciences (NASDAQ: HGSI) today announced that the companies have entered into a definitive agreement under which GSK will acquire HGS for US$14.25 per share in cash. The transaction values HGS at approximately US$3.6 billion on an equity basis, or approximately US$3 billion net of cash and debt, and represents a premium of 99% to the HGS closing price of US$7.17 per share on 18 April 2012, the last day of trading before HGS publicly disclosed GSK's initial private offer. The Boards of Directors of both companies have approved the transaction.
The transaction is well aligned with GSK's long-term strategy of delivering sustainable growth, simplifying GSK's business model, enhancing R&D returns and deploying capital with discipline. Through complete ownership of BENLYSTA, albiglutide and darapladib, GSK can simplify and optimize R&D, commercial and manufacturing operations to advance these products most effectively and efficiently while securing the full potential long-term value of the assets. GSK expects to achieve at least US$200 million in cost synergies to be fully realized by 2015, subject to appropriate consultation, and expects the transaction to be accretive to core earnings beginning in 2013. GSK also assessed the potential returns of this acquisition relative to its long-term share buyback program. As part of this ongoing program, GSK continues to expect to repurchase £2-2.5 billion in shares in 2012.
Sir Andrew Witty, Chief Executive Officer of GSK, said: "We are pleased to have reached a mutually beneficial agreement with HGS on friendly terms and believe the combination of GSK and HGS represents clear financial and strategic logic for both companies and our respective shareholders. The transaction meets GSK's strict financial criteria for acquisitions, and we expect will deliver significant returns over the long-term. This is a natural next step in our nearly 20-year relationship with HGS, and we look forward to working with HGS to integrate our businesses and to realizing the full value of BENLYSTA, albiglutide, and darapladib for the benefit of patients and our shareholders."
H. Thomas Watkins, President and Chief Executive Officer, HGS, said: "After a thorough analysis of strategic alternatives, HGS has determined that a combination with GSK is the best course of action for our company and the best way to maximize value for our stockholders. HGS has had a long and productive working relationship with GSK, and together we will be uniquely positioned to achieve the full potential of BENLYSTA and other products in our pipeline for the benefit of those battling serious disease around the world. I would like to thank the dedicated employees of HGS, who have worked tirelessly to achieve breakthrough results and are the foundation of our success. We look forward to working with GSK to ensure a seamless transition for all of our stakeholders."
GSK has amended its pending tender offer to increase the price to US$14.25 per share and to extend the expiration of the offer to 12:00 midnight, New York City time, on 27 July 2012. As of the close of business on 13 July, approximately 427,042 shares had been tendered and not withdrawn, pursuant to the offer. The offer is subject to customary conditions as set forth in the Merger Agreement being filed today by the parties with the SEC.
Lazard and Morgan Stanley are acting as financial advisors to GSK, and Cleary Gottlieb Steen & Hamilton and Wachtell, Lipton, Rosen & Katz are providing legal advice to the company. Goldman, Sachs & Co. and Credit Suisse Securities (USA) LLC are serving as financial advisors to HGS, and Skadden, Arps, Slate, Meagher & Flom LLP and DLA Piper LLP (US) are serving as legal counsel.
GlaxoSmithKline to acquire Human Genome Sciences after raising bid to $3.6 billion
By Steven Overly, Published: July 16
British drugmaker GlaxoSmithKline has agreed to pay $3.6 billion for Rockville-based Human Genome Sciences after a months-long buyout dispute, marking the largest sticker price for a local biotechnology acquisition in five years.
The deal brings an end to what had become an increasingly heated battle for control of the life sciences company, one of the region's highest-profile biotechnology firms.
Glaxo has extended multiple buyout offers since April that valued HGS at $2.6 billion, or $13 per share, but the company's board of directors repeatedly rejected them as too low .
The latest agreement would fetch $14.25 per share in cash for HGS, a transaction value worth about $3.6 billion, or approximately $3 billion after subtracting HGS's cash and debt, the companies said.
The Maryland biotechnology industry has seen a number of big-ticket buyouts in recent years, though none as large as the $15.6 billion that Gaithersburg-based MedImmune garnered in 2007. More recently, Micromet and Martek Biosciences each sold for roughly $1.1 billion.
HGS was founded by William Haseltine in 1992 with millions of dollars in backing from venture capitalists looking to take advantage of the latest discoveries in genome science. The company successfully developed the first new treatment for lupus in 50 years, but the therapeutic and commercial success of its research has taken longer to materialize than many had hoped.
A person familiar with the negotiations, who spoke on the condition of anonymity because public comment has not been authorized, said HGS officials contacted Glaxo on Friday to negotiate the sale. The talks continued through the weekend and resulted in the deal announced Monday, the deadline HGS had set to receive alternative bids.
Both firms declined to comment.
"I'm sure some HGSI members or management would like a higher price and they tried to find that," said Liisa Bayko, managing director at JMP Securities. "It doesn't look like there were other bidders at current [price] levels because the price they negotiated to is not that far off from where they started."
Glaxo had attempted to bypass the board and buy stock directly from investors in May. HGS then thwarted that effort by moving forward with plans for a "poison pill" that would make acquiring its stock near impossible. Some disgruntled shareholders filed a lawsuit in response.
"We've seen a number of hostile bids in this space but going through what's kind of an extraordinary step of a poison pill approach, instead of taking it to shareholders and arguing it out there, was kind of unprecedented," said Christopher Raymond, senior biotechnology analyst at Robert Baird.
The buyout battle was all the more notable because HGS and Glaxo are development and marketing partners on several drugs including Benlysta, which was approved by the Food and Drug Administration in March to treat systemic lupus. The firms have two other drugs under development: darapladib for cardiovascular disease and albiglutide for diabetes.
Glaxo has said it expects to save as much as $200 million by 2015 as a result of "cost synergies" between the two companies, though it's unclear whether some of that savings would include layoffs at HGS's Maryland facilities.
Some analysts predicted a higher sales price because HGS stock nearly hit the $30 mark last year. The $14.25 per share price represents a 99 percent premium over the closing stock price of $7.17 on April 18, before the initial buyout was proposed.
"If you own this [stock] year to date, you should be pretty happy," Raymond said. "But it's been a lot higher than here, so is it a ding on HGS? In some ways I think you can argue they've definitely not fulfilled the promise of this name's history going back."
After the approval of Benlysta, the company's fortunes appeared to have shifted and it seemed ready to carry a drug the distance from discovery to market without being snapped up by a pharmaceutical giant.
"HGS was viewed as being the first biotech company that took their own drug and became a pharmaceutical company," said Steven Fuller, director of the Center for Regional Analysis at George Mason University. "They grew up on their own. Then it didn't happen."