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GSK takes acquisition offer to HGS shareholders
LONDON—With the announcement that it will not be participating in Human Genome Sciences' (HGS) strategic review process, GlaxoSmithKline plc (GSK) is going hostile, taking its acquisition offer straight to HGS' shareholders. GSK will commence its tender offer this week.
GSK first made its acquisition offer last month, offering $13 per share in cash, an 81-percent premium over the closing price of HGS' shares on April 18, for an aggregate total of approximately $2.6 billion. HGS responded with its refusal on April 19, claiming the offer "does not reflect the value inherent in HGS." The company went on to announce that its board of directors had authorized a strategic alternatives review process to determine the best direction for the company, bringing on Goldman, Sachs & Co. and Credit Suisse Securities (USA) LLC as financial counsel and Skadden, Arps, Slate, Meagher & Flom LLP and DLA Piper LLP (US) as legal counsel. HGS invited GSK to take part in the process, requesting additional information regarding products in GSK's pipeline to which the companies share financial rights.
"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," said Sir Andrew Witty, CEO of GSK, in a press release about the initial offer.
GSK has chosen not to participate in the strategic alternatives review process for a number of reasons. The company feels that its participation is unnecessary since the offer is not conditioned on due diligence, and noted that the four weeks that have passed since the offer was made on April 11, plus the 20 business days the tender offer has to stay open following commencement, "provides a reasonable amount of time for HGS to complete its review of alternatives." GSK noted in a press release that "it is important for HGS shareholders to understand that GSK is committed to proceeding with its offer," and that "there is clear strategic and financial logic to this combination and HGS shareholders should have the opportunity to decide for themselves on the merits of the offer."
The company also noted that it believes it is "uniquely positioned to deliver on the promises of Benlysta, albiglutide and darapladib," and that it would prefer to have the acquisition be a friendly and timely transaction.
HGS responded by announcing that its board of directors, together with its financial and legal counsel, will carefully review the offer, adding that it plans to share its recommendation with shareholders within ten business days. The company added a note that "the proposed $13.00 per share offer price is identical to the price of the proposal received from GSK on April 11, 2012 that HGS determined does not reflect the value inherent in HGS." HGS' strategic alternatives review process is still ongoing, the company announced.