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.