(In U.S. dollars. Adds analyst’s comment)
TORONTO, April 4 (Reuters) - India’s Jubilant Organosys Ltd JUBO.BO said on Friday it plans to buy Canada’s Draxis Health DAX.TO DRAX.O for about $255 million as it seeks entry into North America’s key radiopharmaceutical sector.
Jubilant said it would pay $6.00 a share for all the outstanding shares of the specialty health-care company. Draxis’s board has approved the transaction and recommends that shareholders accept the offer.
“Draxis represents a unique opportunity in the North American market, offering Jubilant entry into the attractive, regulated, high-growth and high-margin radiopharmaceutical business,” Jubilant said in a release.
“It also enables Jubilant to consolidate its position in the sterile and non-sterile contract manufacturing business.”
The two key platforms at Quebec-based Draxis are its Draximage radiopharmaceutical division and its contract manufacturing business.
Competition in the nuclear isotope business was ratcheted up recently after a U.S. company bought a similar operation from Bristol Myers Squibb (BMY.N).
The purchase price represents a 22.4 percent premium over Thursday’s closing price of $4.90 for a Draxis share on Nasdaq.
Draxis shares were up 99 cents, or 20.2 percent, at $5.89 on Nasdaq following a trading halt. The shares, which were also halted on the Toronto Stock Exchange, were up C$1.01, or 20.5 percent, at C$5.95 when activity resumed.
Draxis has agreed to pay Jubilant a break fee of $10.5 million if the transaction is not completed. Jubilant said it plans to fund the acquisition through a combination of cash-on-hand and debt.
Douglas Loe, an analyst at Versant Partners, said he was uncertain whether there will competing takeover offers for Draxis, but said the $6.00 a share bid was well below his one-year target of $7.50 a share.
“I am not aware of any competitive bids, but it still seems to me, based on our fundamental valuation of the company, that other contract manufacturers or specialty-pharma companies could see the hidden value in Draxis that we do, that forms the basis of the gap between the bid and our target,” Loe said.
But Maria Luckevich, a biotechnology analyst at Research Capital, said she did not expect a bidding war, noting that the diverse nature of Draxis’s two key businesses would make it difficult to find more buyers.
“With the inherent difficulty in selling a business like Draxis, there aren’t enough people who would find a business like that attractive right now,” she said.
“I don’t think you are going to find anybody aggressively trying to outbid.”
$1=$1.01 Canadian Reporting by Scott Anderson; Editing by Peter Galloway