The terms of acquisition involves Lundbeck paying $7.94 per share Chelsea Therapeutics International Ltd. (NASDAQ:CHTP) stakeholders totaling $658 million (approximately DKK 3.54 billion).
The proposed acquisition would be cash accretive to Lundbeck in 2015 and earnings accretive in 2016. Lundbeck is a global pharmaceutical company specialized in brain diseases while Chelsea Therapeutics is a biopharmaceutical development company.
As part of the definitive agreement reached between the two companies, Lundbeck will begin a tender offer for all outstanding shares of Chelsea Therapeutics International Ltd. (NASDAQ:CHTP), whereby the latter’s shareholders will be offered an upfront payment and contingent value rights (CVRs), representing a total potential consideration of up to $7.94 per share or $658 million on a fully dilutive basis.
Lundbeck’s payment consideration includes $6.44 per share in cash as well as CVRs that may pay up to a total of an additional $1.50 upon achievement of certain commercial milestones related to NORTHERA’s commercial performance in the period 2015-2017.
The total potential consideration represents an attractive premium of 59% over the closing price of Chelsea shares on May 7, 2014.
The acquisition will allow Lundbeck to leverage its expertise in rare neurologic disorders in the U.S. through the upcoming launch of NORTHERA, which was approved by the FDA on February 18th, 2014 for the treatment of symptomatic neurogenic orthostatic hypotension.
Chelsea acquisition was speculated?
As reported by us earlier, Wedbush Equity research analyst Liana Moussatos in the report in March reiterated speculation that a partnership or acquisition of Chelsea Therapeutics International Ltd. (NASDAQ:CHTP) could be on the horizon. Though the company was anticipated to explore all strategic alternatives including a licensing deal or being acquired, it was also expected that Chelsea to prepare to launch Northera on their own.
Though Chelsea Therapeutics International Ltd. (NASDAQ:CHTP)’s management had consistently reiterated their dual strategy to pursue commercialization of Northera on their own vs. strategic alternatives for either a commercial partner or acquisition, it was believed the lack of conference calls suggested the latter would be most likely.
In its announcement, Lundbeck indicated that the proposed acquisition is expected to be dilutive to both cash flow and EBIT for the year. The expected impact on Lundbeck’s profitability in 2014 will depend on the timing of the closing of the transaction. However, on a pro forma basis assuming the transaction is closed on July 1, 2014, Lundbeck expects to incur costs of approximately DKK 500 million in incremental costs related to the acquisition of Chelsea Therapeutics International Ltd. (NASDAQ:CHTP).
The following are the financial forecast as unveiled by Lundbeck: