GlaxoSmithKline has announced that it will acquire Human Genome Sciences (HGS) for $14.25 per share in cash, or approximately $3.6 billion on an equity basis. The offer has been approved by HGS, and the definitive agreement between the companies signals the end of negotiations that have been taking place since April 2012.
The transaction will provide GSK will complete ownership of Benlysta, which was approved by FDA in March 2011 to treat lupus. In addition, GSK will receive full ownership of two experimental drugs, albiglutide and darapladib, which are being investigated as possible treatments for diabetes and atherosclerosis, respectively. GSK has said it will see regulatory approval on albiglutide next year. Darapladib is still in trials, but has shown promising results so far according to press statements. All three drugs were developed as part of the collaboration between GSK and HGS.
“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,” Sir Andrew Witty, chief executive officer of GSK, said in a statement. “This is a natural next step in our nearly 20-year relationship with HGS.”
GSK first publicly offered to acquire HGS in April for $13 per share, but the price was condemned by HGS who strongly felt that the price did not reflect the company’s inherent value. The new tender offer will be open until July 27, 2012.
In a statement, H. Thomas Watkins, president and chief executive officer of 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.”
GSK added that it expects $200 million in cost synergies to be fully realized by 2015, subject to appropriate consultation. The transaction is expected to be accretive to core earnings beginning in 2013, and GSK is also assessing the potential returns of the acquisition relative to its long-term share buyback program. In a statement, GSK explained that it expects to repurchase £2–2.5 billion ($3.1–3.9 billion) in shares in 2012.