GSK Launches Takeover Bid for Longtime Partner

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GlaxoSmithKline (LSE:GSK), the pharmaceutical giant, announced today that it has launched an attempt to acquire Human Genome Services, a longtime research partner of the firm. GSK has offered to pay $13 a share for all of HGS’s outstanding shares, an 81% premium.

HGS, which is currently valued at $7.17 a share, does not believe GSK’s offer to accurately reflect the company’s worth. HGS is considering alternatives, including putting itself up for sale, and has sought the advice of investment banks Goldman Sachs and Credit Suisse.

“I guess they (GSK) have been watching and waiting. It’s going to be very difficult for Human Genome to argue for a higher price because obviously this is what the market thinks they’re worth,” said Tim Franklin, an analyst at MainFirst Bank AG.

Glaxo’s bid indicates the confidence it has in the potential success of several drugs that the two firms are jointly developing. The drugs in development include pills for diabetes and cardiovascular disease.

“When you have so many projects together in late-stage development, it makes sense to want to integrate 100 percent of their value. It means Glaxo thinks these projects have a potential. Hard to say which project they are betting on the most,” said Eric Le Berrigaud, an analyst at Bryan, Garnier & Co. in Paris.

Last year, Glaxo and HGS successfully collaborated on a drug for lupus. However, sales of the drug, called Benlysta, has disappointed which led to a 76% decrease in HGS’s share price at one point. Glaxo sees the stock slide as reason enough for its takeover bid, yet HGS views the attempt as hostile and unsolicited.

“We are disappointed that Human Genome Sciences has rejected our offer without discussion and are confident that our offer is in the best interest of shareholders of both companies,” said GSK CEO Sir Andrew Witty.

Executive Commentary

“Having worked together with Human Genome Sciences for nearly 20 years, we believe there is clear strategic and financial logic to this combination for both companies and our respective shareholders – and that now is the appropriate time in the evolution of our relationship for our two companies to combine. This offer reflects full and fair value for Human Genome Sciences and the synergies inherent in this combination. It also eliminates substantial execution risk for Human Genome Sciences shareholders and delivers immediate and certain value that is superior to what we believe Human Genome Sciences can reasonably expect to create as a standalone company.” – Glaxosmithkline CEO Sir Andrew Witty

Company Spotlight

GlaxoSmithKline is a leading pharmaceutical and healthcare companies based in the United Kingdom with branches in more than 100 countries around the world.

References
↑ Bloomberg News
 Evening Standard
↑ Wall Street Journal
 Company Profile

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