GlaxoSmithKline plc (NYSE:GSK) has announced that it plans to make a $2.59 billion hostile bid for Human Genome Sciences (NASDAQ:HGSI) directly to the shareholders later this week after the board of directors rejected the big earlier this month.
On Wednesday, we got more details as to what Glaxo will do to win over shareholder support to approve the takeover. The British biotech firm said they will offer shareholders $13 a share which is $0.81 above Human Genome’s closing price on April 18, day before Glaxo made the first offer to buyout the firm.
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This is the latest pharmaceutical firm to attempt to make a deal as big firms are looking to counter expiring patents with bolstering pipelines. Back in April, we saw AstraZeneca plc (NYSE:AZN) buyout Ardea Biosciences, Inc. (NASDAQ:RDEA) for $1.26 billion. However, it hasn’t been all that easy as we saw with the Illumina-Roche deal. For those of you who didn’t know or forgot about the Illumina-Roche deal, Roche Holding Ltd. (PINK:RHHBY) proposed a $6.7 billion buyout for Illumina, Inc. (NASDAQ:ILMN). Illumina discredited the bid and essentially thought that the offer was undervalued, however, Roche didn’t want to pay any more for the firm due to the worry about Illumina’s gene-mapping technology and its potential for being outdated. In the end, Roche dropped the bid and moved on.
According to the NY Times, Glaxo and Human Genome have a history. They have worked to develop drugs for heart disease and diabetes, as well as the Lupus drug, Benlysta. However, after Human Genome turned down the first offer, saying it was not affectively showing the value of the company it appears that the former relationship may be strained. Especially since Glaxo is now going to the shareholders rather than working with the board of directors to find a common ground.
Other things aside, I think Glaxo could seriously benefit from a Human Genome buyout because the firm’s pipeline has potential. Not to mention, the fact that these two firms have worked with each other before is another reason why Glaxo-Human Genome deal could work out well.
Unfortunately, Glaxo is going to have a hard time selling $13 a share buyout to the shareholders. Human Genome’s share price as of May 9th is $14.28 and shareholders may demand to raise the bid before they agree to a hostile takeover. We will have to wait and see how the shareholders respond to the Glaxo proposal and to what degree Human Genome’s management tries to persuade shareholders to turn down the bid.