2nd UPDATE: Astellas Plans Unsolicited $3.5 Billion Bid For OSI
March 01 2010 - 11:52AM
Dow Jones News
Astellas Pharma Inc. (ALPMY, 4503.TO) launched an unsolicited
$3.5 billion bid to buy OSI Pharmaceuticals Inc. (OSIP) for $52 a
share in cash, becoming the latest Japanese drug maker to go after
a U.S. company.
OSI shares surged Monday, rising above the offer price,
suggesting that Wall Street speculated that a higher offer might be
needed to buy the maker of the cancer drug Tarceva.
Astellas, Japan's second-biggest pharmaceutical company by
sales, said it has been attempting for 13 months "to engage OSI in
meaningful discussions," although OSI has snubbed the takeover
attempt as too low.
In a statement, OSI said its board rejected Astellas' same offer
last month because "it believes Astellas' proposal very
significantly undervalues the company." The company offered to
provide Astellas with "non-public information which is fundamental
to its valuation," but it said Astellas responded with its tender
offer.
OSI said its board will review the tender offer, but the company
advised shareholders to take no action at this time. An OSI
spokeswoman declined to comment further.
The offer represents a 40% premium over Friday's closing price
of $37.02. In response, OSI shares jumped 52% to $56.45 on almost
30 times its regular trading volume.
Analyst Eric Schmidt with Cowen & Co. believes that Astellas
will be successful buying OSI with a "modestly higher" offer in
order to close a deal on friendly terms, but he doesn't think other
bidders will emerge. Schmidt estimates that OSI is worth $42 a
share.
"Astellas's $52/share offer appears quite generous relative to
our sum-of-the-parts analysis and OSIP's fundamentals are somewhat
mixed," Schmidt said.
Morgan Stanley analyst Steven Harr expects other companies to
evaluate OSI, and he believes that the current bid will need to go
10% to 15% higher, which could put the offer close to $60 a
share.
Astellas offer comes amid continued interest from Japanese
pharmaceutical companies in the U.S., as they diversify their
business because of expiring patents at home.
Deals include Dainippon Sumitomo Pharma Co.'s (4506.TO) $2.6
billion buy of Sepracor Inc., Takeda Pharmaceutical Co. Ltd.'s
(4502.TO) $8.8 billion acquisition of Millennium Pharmaceuticals,
and Eisai Co. Ltd. (4523.TO) paying $3.9 billion for MGI Pharma
Inc.
But the effort hasn't always been successful. Astellas' offer
for OSI is almost a year after it dropped an attempt to buy U.S.
biopharmaceutical company CV Therapeutics Inc. in a hostile
takeover bid for the heart-drug maker.
In a similar situation to OSI, Astellas sought talks with CV
until launching a $1.1 billion offer, but it was later outbid by
Gilead Sciences Inc.'s (GILD) $1.4 billion offer.
Astellas' Chief Financial Officer Yoshihiko Hatanaka
acknowledged that the process with OSI is similar to that with CV
Therapeutics, but he stressed that "each transaction is very
unique," in an interview Monday.
He declined to say whether the company is open to raising its
offer or if it has changed the price at all since initially
approaching OSI. He said the current represents the "fair and full
value of Tarceva and the pipeline."
OSI's sole marketed product is cancer drug Tarceva, which it
sells with Swiss drug giant Roche Holding AG (RHHBY, ROG.VX). The
pill, used to treat lung and pancreatic cancer, had worldwide sales
of $1.2 billion in 2009
Astellas has said it is open to speaking with OSI to reach a
"negotiated transaction", but that the Japanese company also
intends to nominate directors at OSI's upcoming annual meeting.
In pursuing a deal, Astellas has had several exchanges with OSI,
including an hour-long meeting between the two chief executives in
New York City last month, according to Hatanaka. Astellas said it
has received a response from OSI that its offer "very significantly
undervalues" the company.
Astellas hasn't been in contact with Roche about its offer, but
Hatanaka said that OSI's agreement with Roche does not have change
of control provisions.
Officials from Roche weren't immediately available for
comment.
-By Thomas Gryta, Dow Jones Newswires; 212-416-2169;
thomas.gryta@dowjones.com
(Jonathan D. Rockoff contributed to this story)
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