And they expect to get the 'lifeblood' given to them for free ?
Wednesday February 26, 9:03 am ET
By Susannah Rodgers
LONDON -- In what is the first hostile bid in the European biotechnology industry, Celltech Group PLC Wednesday made a cash offer for peer Oxford GlycoSciences PLC that could potentially ruin an agreed bid from Cambridge Antibody Technology Group PLC .
ADVERTISEMENTEven though OGS immediately rejected the move as a "spoiling tactic," some analysts said that investors may prefer cash from Celltech to CAT's original share-swap offer.
In a widely anticipated move, Celltech bid 101.4 million pounds ($159.7 million or 148.4 million euros), or 182 pence per OGS share. This is almost 25% higher than CAT's share-swap deal agreed with OGS last month.
When OGS accepted CAT's bid last month, it valued OGS at around 195.5 pence per share. But since then, share prices have slipped, leaving CAT's offer worth just under 150 pence per share.
CAT Chief Executive Peter Chambre wouldn't say whether CAT's bid is a final offer.
"I doubt shareholders will be swayed by the share price on any particular day. I hope they won't," he told Dow Jones Newswires.
Celltech's Chief Financial Officer Peter Allen said despite OGS's initial reaction to the bid, he saw no reason to increase Celltech's offer "in the current circumstances."
Mr. Allen said he viewed the bid as a cash-neutral asset acquisition that would bring in OGS's one marketed product -- Zavesca, for Gaucher's disease, a rare genetic disorder that results in a deficiency of a certain enzyme in the body -- as well as its library of over 4,000 drug targets and its informatics technology.
"The life blood of biotechnology companies is having a supply of targets on which to work their discovery magic, and Celltech like others is always looking for new targets," Mr. Allen said.
The board of Oxford GlycoSciences, however, formally rejected Celltech's offer, saying it undervalued OGS and gave no upside for shareholders, while denying them a future stake in the rewards of OGS's research and development.
"It's very clear it's a cheap bid," David Ebsworth, OGS chief executive, told Dow Jones Newswires.
Typically a cash offer should be at least 20% higher than a share offer. Celltech's is only 23% higher, and it's only that much higher than CAT's because shares have slipped since last month's offer, market sources said.
Mr. Ebsworth said OGS has received numerous requests for financial information since CAT's offer, and that OGS would evaluate any subsequent offers. Celltech should have offered a share alternative, rather than simply cash, which gave shareholders no long-term role, he said.
"It's not that we're definitely against Celltech, or a cash offer, or that we just want a cozy deal with CAT," he said. "I didn't expect to be in a hostile process since there's never been one in the industry."
OGS and CAT shareholders are due to vote March 11 on the CAT offer, but Mr. Ebsworth said the date may be postponed. OGS is liable to pay CAT a fee of 1.1 million pounds if another bid is accepted.
"Celltech's offer gives shareholders the opportunity of selling out at what has to be a low point in the sector," said CAT's Mr. Chambre.
"I think what our offer offers shareholders is a continuing investment in a sector and the building of a strong company with enormous potential," he said.
Celltech's Mr. Allen said he was surprised by OGS's reaction, given the offer was at a premium to the existing CAT price. He said Celltech preferred to use cash rather than shares as currency, and had used cash in its last four acquisitions.
"We're in a very uncertain market, and I think an offer for cash is certainty, and will be well respected and highly regarded by OGS shareholders. I certainly wouldn't entertain the idea of a spoiling bid," Mr. Allen said.
Some analysts seemed to agree.
While Celltech's offer is still below the net cash in the business, the fact that the offer is in cash is likely to appeal to shareholders, said Erling Refsum, analyst at Nomura. The support of the OGS board for CAT's original offer will hold little persuasion over cold cash, and while CAT may improve its offer, it's unlikely to be able to match that of Celltech, he said.
Analysts still believe a further contender may step into the ring.
Both the CAT and Celltech offers value OGS at less than the cash that OGS has in the bank at around 130 million pounds. Although the offers take into account OGS's cash burn of around 40 million pounds a year, an offer nearer to the cash value might prove tempting.
OGS's U.S. biotech collaborator Medarex Inc. (NasdaqNM:MEDX - News) , Princeton, N.J., would probably be able to make a much stronger offer, and its CEO, Donald Drake, sits on the board of OGS. Mr. Drake didn't take part in the CAT merger discussions, given his competing interests.
"The ball's back in Celltech's court to lift its bid," said an analyst. He speculated that Celltech's below-cash offer might drag other potential bidders into the game.
-By Susannah Rodgers, Dow Jones Newswires; 44 20 7842 9269; susannah.rodgers@dowjones.com
(Tim Falconer contributed to this article.) |
