Avanir’s Takeover Price Leaves Room for Counteroffers: Real M&A
2014-12-04 00:00:01.3 GMT
(For a Real M&A column news alert: {SALT REALMNA <GO>}.)
By Tara Lachapelle
Dec. 4 (Bloomberg) -- Avanir Pharmaceuticals Inc. may be
leaving some money on the table.
The Aliso Viejo, California-based company, which makes a
drug to control symptoms of Alzheimer’s disease, agreed to sell
itself to Japan’s Otsuka Holdings Co. for $3.2 billion, or $17 a
share. That’s 4 percent lower than analysts’ average projection
for where the stock would have traded in a year. Jefferies Group
LLC’s Thomas Wei said he would have valued Avanir at $26 to $31
a share in a takeover. That implies Avanir may have been able to
negotiate for at least an additional $1.7 billion for its
shareholders.
Counterbidders are still possible. Just one month ago, JMP
Group Inc. said Eli Lilly & Co., H. Lundbeck A/S, Mallinckrodt
Plc and Shire Plc all could be logical acquirers of Avanir. And
they’re among more than a dozen suitable buyers that Wei
highlighted this week.
The catch is that Avanir agreed not to seek out other bids,
and should it walk away from this deal, it will have to pay
Otsuka $90 million. Avanir shareholders also don’t get to vote
on the transaction, so to get more money they’ll need another
drug company to make an unsolicited higher bid.
Otsuka’s offer is “underwhelming,” Ritu Baral, a New
York-based analyst for Cowen Group Inc., wrote in a Dec. 2 note.
“While we see no evidence of other potential bidders at this
point, we think there might have been interest from other
pharmas with portfolios in Alzheimer’s” and related neurologic
disorders.
“We will be paying close attention to the upcoming merger
filings” for details on the transaction such as the timing of
the talks and other potential bidders, she said.
Tight Spread
While Avanir’s stock closed yesterday 8 cents below
Otsuka’s offer at $16.92, which usually implies investors aren’t
anticipating a bidding war, it’s also a very tight spread for a
deal that was just announced. The average spread for pending
acquisitions of U.S. companies is currently 5.7 percent below
the offer price and the median is 2.4 percent, compared with
Avanir’s 0.5 percent, according to data compiled by Bloomberg.
Avanir’s stock price had risen 344 percent this year
through last week, before the deal was made public. The company
makes a drug called Nuedexta that treats uncontrollable crying
or laughing believed to be caused by neurologic conditions such
as Alzheimer’s. It won a patent case in April that will stave
off generic competition for Nuedexta for 12 years.
Positive phase 2 study data on Sept. 15 for another version
of the medicine contributed to much of the stock gains. The new
version is being tested to treat agitation in Alzheimer’s
patients, a much larger market.
Past Talks
Avanir had been in talks in September -- before the study
data was released -- about a merger or sale to a specialty drug
company, according to a person with knowledge of the matter. But
when the trial results spurred a one-day surge of 85 percent, it
put the deal out of range for Avanir’s potential partners, the
person said, asking not to be named because the matter was
private.
Less than three months later, Avanir has agreed to sell
itself to Otsuka. The merger filing with the U.S. Securities and
Exchange Commission this week didn’t provide details about
Avanir’s sale process or whether it received interest from other
buyers. Ian Clements, a spokesman for Avanir, said he couldn’t
comment further.
While it agreed to end any talks with other companies and
not solicit higher bids, the agreement says Avanir’s board can
change its mind if the company receives a better proposal and
determines that ignoring the offer would be inconsistent with
its fiduciary duties to shareholders.
Possible Counterbidders
As far as other potentially interested acquirers, Cowen’s
Baral cited Teva Pharmaceutical Industries Ltd.’s recent
investments in products for central nervous system disorders, as
well as Actavis Plc’s purchase of Forest Laboratories Inc.
earlier this year to gain the Alzheimer’s treatment Namenda.
Indianapolis-based Eli Lilly may also be interested in regaining
its lead in CNS drugs, she said.
Lundbeck, Mallinckrodt and Shire were also logical
acquirers, Jason Butler, a New York-based analyst at JMP Group
Inc., said in an interview in October. Copenhagen-based Lundbeck
and Dublin-based Mallinckrodt both have products to treat brain
diseases. Shire, also based in Dublin, focuses on rare diseases
and has a treatment for attention deficit hyperactivity
disorder. Shire has said it will continue seeking deal
opportunities after AbbVie Inc. unexpectedly dropped plans to
buy the company.
Representatives for Shire, Lundbeck, Mallinckrodt, Petach
Tikva, Israel-based Teva, Dublin-based Actavis and Eli Lilly
declined to comment on whether their companies are planning to
bid for Avanir.
Deal Windfall
For investors who bought Avanir shares before May, when
they were trading at or below $5 apiece, Otsuka’s offer may be
just fine.
“It’s unbelievable,” Peter Zeuli, chief investment
officer of Voorhees, New Jersey-based Philadelphia Investment
Partners LLC, said in a phone interview. “We started buying the
stock when it was around $4 or $5. The portfolio manager in me
says, ‘Don’t get greedy.’ But you never know.”
For Related News and Information:
Avanir Inroads in Alzheimer’s Market Justify Offers: Real M&A
NSN NE9XSN6JTSF4 <GO>
Japan’s Otsuka Agrees to Buy Avanir Pharma for $3.54 Billion
NSN NFYB2J6JIJV3<GO>
Merger-Arbitrage Spreads: MARB <GO>
Real M&A columns: NI REALMNA <GO>
Top deal stories: DTOP <GO>
To contact the reporter on this story:
Tara Lachapelle in New York at +1-212-617-8911 or
tlachapelle@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Elizabeth Wollman
2014-12-04 00:00:01.3 GMT
(For a Real M&A column news alert: {SALT REALMNA <GO>}.)
By Tara Lachapelle
Dec. 4 (Bloomberg) -- Avanir Pharmaceuticals Inc. may be
leaving some money on the table.
The Aliso Viejo, California-based company, which makes a
drug to control symptoms of Alzheimer’s disease, agreed to sell
itself to Japan’s Otsuka Holdings Co. for $3.2 billion, or $17 a
share. That’s 4 percent lower than analysts’ average projection
for where the stock would have traded in a year. Jefferies Group
LLC’s Thomas Wei said he would have valued Avanir at $26 to $31
a share in a takeover. That implies Avanir may have been able to
negotiate for at least an additional $1.7 billion for its
shareholders.
Counterbidders are still possible. Just one month ago, JMP
Group Inc. said Eli Lilly & Co., H. Lundbeck A/S, Mallinckrodt
Plc and Shire Plc all could be logical acquirers of Avanir. And
they’re among more than a dozen suitable buyers that Wei
highlighted this week.
The catch is that Avanir agreed not to seek out other bids,
and should it walk away from this deal, it will have to pay
Otsuka $90 million. Avanir shareholders also don’t get to vote
on the transaction, so to get more money they’ll need another
drug company to make an unsolicited higher bid.
Otsuka’s offer is “underwhelming,” Ritu Baral, a New
York-based analyst for Cowen Group Inc., wrote in a Dec. 2 note.
“While we see no evidence of other potential bidders at this
point, we think there might have been interest from other
pharmas with portfolios in Alzheimer’s” and related neurologic
disorders.
“We will be paying close attention to the upcoming merger
filings” for details on the transaction such as the timing of
the talks and other potential bidders, she said.
Tight Spread
While Avanir’s stock closed yesterday 8 cents below
Otsuka’s offer at $16.92, which usually implies investors aren’t
anticipating a bidding war, it’s also a very tight spread for a
deal that was just announced. The average spread for pending
acquisitions of U.S. companies is currently 5.7 percent below
the offer price and the median is 2.4 percent, compared with
Avanir’s 0.5 percent, according to data compiled by Bloomberg.
Avanir’s stock price had risen 344 percent this year
through last week, before the deal was made public. The company
makes a drug called Nuedexta that treats uncontrollable crying
or laughing believed to be caused by neurologic conditions such
as Alzheimer’s. It won a patent case in April that will stave
off generic competition for Nuedexta for 12 years.
Positive phase 2 study data on Sept. 15 for another version
of the medicine contributed to much of the stock gains. The new
version is being tested to treat agitation in Alzheimer’s
patients, a much larger market.
Past Talks
Avanir had been in talks in September -- before the study
data was released -- about a merger or sale to a specialty drug
company, according to a person with knowledge of the matter. But
when the trial results spurred a one-day surge of 85 percent, it
put the deal out of range for Avanir’s potential partners, the
person said, asking not to be named because the matter was
private.
Less than three months later, Avanir has agreed to sell
itself to Otsuka. The merger filing with the U.S. Securities and
Exchange Commission this week didn’t provide details about
Avanir’s sale process or whether it received interest from other
buyers. Ian Clements, a spokesman for Avanir, said he couldn’t
comment further.
While it agreed to end any talks with other companies and
not solicit higher bids, the agreement says Avanir’s board can
change its mind if the company receives a better proposal and
determines that ignoring the offer would be inconsistent with
its fiduciary duties to shareholders.
Possible Counterbidders
As far as other potentially interested acquirers, Cowen’s
Baral cited Teva Pharmaceutical Industries Ltd.’s recent
investments in products for central nervous system disorders, as
well as Actavis Plc’s purchase of Forest Laboratories Inc.
earlier this year to gain the Alzheimer’s treatment Namenda.
Indianapolis-based Eli Lilly may also be interested in regaining
its lead in CNS drugs, she said.
Lundbeck, Mallinckrodt and Shire were also logical
acquirers, Jason Butler, a New York-based analyst at JMP Group
Inc., said in an interview in October. Copenhagen-based Lundbeck
and Dublin-based Mallinckrodt both have products to treat brain
diseases. Shire, also based in Dublin, focuses on rare diseases
and has a treatment for attention deficit hyperactivity
disorder. Shire has said it will continue seeking deal
opportunities after AbbVie Inc. unexpectedly dropped plans to
buy the company.
Representatives for Shire, Lundbeck, Mallinckrodt, Petach
Tikva, Israel-based Teva, Dublin-based Actavis and Eli Lilly
declined to comment on whether their companies are planning to
bid for Avanir.
Deal Windfall
For investors who bought Avanir shares before May, when
they were trading at or below $5 apiece, Otsuka’s offer may be
just fine.
“It’s unbelievable,” Peter Zeuli, chief investment
officer of Voorhees, New Jersey-based Philadelphia Investment
Partners LLC, said in a phone interview. “We started buying the
stock when it was around $4 or $5. The portfolio manager in me
says, ‘Don’t get greedy.’ But you never know.”
For Related News and Information:
Avanir Inroads in Alzheimer’s Market Justify Offers: Real M&A
NSN NE9XSN6JTSF4 <GO>
Japan’s Otsuka Agrees to Buy Avanir Pharma for $3.54 Billion
NSN NFYB2J6JIJV3<GO>
Merger-Arbitrage Spreads: MARB <GO>
Real M&A columns: NI REALMNA <GO>
Top deal stories: DTOP <GO>
To contact the reporter on this story:
Tara Lachapelle in New York at +1-212-617-8911 or
tlachapelle@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Elizabeth Wollman