EmailHuman Genome (HGSI $13.99 +0.41) announced that the companies have entered into a definitive agreement under which GSK will acquire HGSI for $14.25 per share in cash. The transaction values HGSI at approxmately $3.6 billion on an equity basis, or ~$3 billion net of cash and debt, and represents a premium of 99% to the HGS closing price of $7.17 per share on 18 April 2012, the last day of trading before HGS publicly disclosed GSK's initial private offer. The Boards of Directors of both companies have approved the transaction. The transaction is well aligned with GSK's long-term strategy of delivering sustainable growth, simplifying GSK's business model, enhancing R&D returns and deploying capital with discipline. Through complete ownership of BENLYSTA, albiglutide and darapladib, GSK can simplify and optimize R&D, commercial and manufacturing operations to advance these products most effectively and efficiently while securing the full potential long-term value of the assets. GSK expects to achieve at least $200 million in cost synergies to be fully realized by 2015, subject to appropriate consultation, and expects the transaction to be accretive to core earnings beginning in 2013.
GSK also assessed the potential returns of this acquisition relative to its long-term share buyback program. As part of this ongoing program, GSK continues to expect to repurchase $2-2.5 billion in shares in 2012. HGSI stated "After a thorough analysis of strategic alternatives, HGS has determined that a combination with GSK is the best course of action for our company and the best way to maximize value for our stockholders. HGS has had a long and productive working relationship with GSK, and together we will be uniquely positioned to achieve the full potential of BENLYSTA.
