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Bayer in negotiations regarding USD2.4 billion acquisition of partner Algeta

November 26
8:41 AM 2013

A report on Bloomberg said Bayer AG started negotiations to acquire its partner Norwegian company Algeta ASA for a reported DKK14.8 billion or USD2.42 billion. The move, said Bloomberg, will allow the biggest drugmaker in Germany full access to medicine for prostate cancer and a pipeline of experimental radiation therapies.

In a statement today, Algeta said it received an initial offer of DKK336 per share. Algeta released a statement following a report regarding Bayer's approach by Frankfurter Rundschau, a German newspaper. The proposal is a 27% premium to Algeta's share price at trading close yesterday, which was DKK264.6 per share. Algeta's shares on the trading bourse reached DKK349.70 per share, thus eliciting a deduction that the Norwegian company expects a higher price.

London-based analyst Guillaume van Renterghem for UBS AG said in an interview with the news agency taht Bayer is funding Algeta's medical trials for Xofigo, a new drug, and that the latter's acquisition could mean the former will not be needing to share profits or make royalty payments for the medicine. However, van Renterghem, Bayer needs to up its offering price.

Xofigo is also known as alpharadin. The new drug is one among the five Bayer believed will record a combined sales potential for the German company of over EUR5.5 billion or USD7.5 billion annually. According to the average of seven estimates, the treatment could generate EUR494 million alone by the year 2016.

Van Renterghem said, "If you believe consensus, they should pay way more than that. They should probably pay $3 billion."

According to data compiled by Bloomberg, the average deal in the biotechnology sector that is larger than USD100 million in the last five years was a 56% premium of closing price.

Bayer spokesperson Guenter Forneck confirmed that the company had extended an offer to Algeta, but did not disclose any other information. Algeta via its spokesman Mike Booth said the deal did not guarantee that the Norwegian firm will agree on such deal. Both of the companies refuse to divulge information on which banks had been tapped to assist them regarding the sale.

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