British drug maker GlaxoSmithKline plc (GSK: Quote,GSK.L) agreed Monday to acquire biotechnology firm Human Genome Sciences, Inc. (HGSI: Quote) for $14.25 per share in an all-cash deal valued at $3.6 billion, including debt. The deal has the approval of the boards of directors of both companies.
The friendly deal was reached after more than three months of hostile takeover campaign by GlaxoSmithKline following the rejection of its initial $13 per share all-cash offer in April by Human Genome, deeming it as too low.
The two companies were locked in friendly talks over the weekend to reach a deal as Human Genome could not attract any higher bids before its self set dead line of July 16.
GlaxoSmithKline has now sweetened its pending tender offer to a price of $14.25 per share and extend the offer until July 27. The $14.25 per share offer represents a hefty 99 percent premium over Human Genome's closing share price of $7.17 on April 18, the day before the initial formal bid was announced.
"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," GSK CEO Sir Andrew Witty said in a statement.
Human Genome was currently under pressure from investors to try and strike a deal with GlaxoSmithKline in the absence of any alternative bids to avoid a share price collapse.
As GlaxoSmithKline already has marketing rights to Human Genome's drugs, it was seen as a natural buyer of Human Genome, and others have shown limited interest to strike a deal.
Rockville, Maryland-based Human Genome and GlaxoSmithKline are already long-time partners in the development of lupus drug Benlysta under a co-development and commercialization agreement entered into in 2006.
Benlysta was approved by the FDA in 2011, and is the first lupus medication to be approved in more than 50 years. Both companies are also involved in the development of two more drugs for heart disease and diabetes, which have a potential to generate big money. The deal will see GlaxoSmithKline acquire full ownership of Benlysta, albiglutide and darapladib.
"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," Witty added.
GlaxoSmithKline expects to realize cost synergies of at least $200 million by 2015 through the deal, which is also anticipated to be accretive to its core earnings beginning in 2013.
After rejecting the initial offer from GlaxoSmithKline in April, Human Genome promptly put itself on the block and invited GlaxoSmithKline to participate in an auction process.
Human Genome's board authorized the company to explore strategic alternatives, including a potential sale, and retained Goldman, Sachs & Co. and Credit Suisse Securities (USA) LLC to assist the process. Human Genome had set itself a July 16 deadline for finding higher bids.
Meanwhile, GlaxoSmithKline decided to take its bid directly to Human Genome's shareholders in mid-May and extended its offer several times, with the last extension expiring on Friday.
Human Genome also adopted a poison pill in mid-May to thwart any hostile takeover bid in the form of a shareholder rights plan.
In Monday's regular trading session, GSK is currently trading at $45.06, up $0.06 or 0.13% on a volume of 0.28 million shares. In the past 52-week period, the stock has been trading in a range of $38.76 to $47.48. HGSI is trading at $14.20, up $0.62 or 4.60% on a volume of 35.37 million shares.
Meanwhile, GSK.L is trading on the LSE at 1,445.00 pence, down $1.00 pence or 0.07% on a volume of 1.40 million shares.
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by RTT Staff Writer
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