(Reuters) - Ireland-based Horizon Pharma Plc (HZNP.O) offered to buy Depomed Inc DEPO.O in a $3 billion deal, taking its bid hostile after the smaller drugmaker refused to engage in talks.
Depomed shares touched a record high of $28.75, but were still trading below Horizon’s offer price of $29.25. Horizon’s shares were down about 6 percent at $32.52.
Horizon Pharma’s offer is unchanged from the price it offered on May 27 and represents a 42 percent premium to the stock’s Monday close.
Depomed said later on Tuesday that it had already rejected the offer, and could create “significant and sustainable, long-term value” independently.
The overlap between both companies’ shareholders is one of the main reasons why Horizon took the offer hostile, Chief Executive Tim Walbert told Reuters in an interview.
Walbert estimated that more than 25 percent of Horizon shareholders also own Depomed stock, while a smaller percentage of Depomed shareholders likely own Horizon shares.
Over the last couple of years Depomed shareholders had approached him to discuss a possible deal, he added.
The equity value of the all-stock offer works out to about $1.74 billion, according to Thomson Reuters calculations based on 59.6 million outstanding Depomed shares.
Walbert, who has been at helm since June 2008, did not reveal whether Horizon would sweeten its offer further.
Any potential deal for Depomed will not stop Horizon from seeking other acquisitions, as it continues to hold discussions over assets in the range of $20-$200 million, Walbert said.
The potential deal will nearly double Horizon’s portfolio of marketed medicines, the company said.
Horizon has four pain treatments on the market, while Depomed has five, including its flagship product, Nucynta.
Depomed bought the rights to Nucynta from Johnson & Johnson (JNJ.N) for $1.05 billion in January.
J&J received a subpoena from the Department of Health in 2013 over marketing practices for Nucynta, which is currently facing a generic threat from Allergan Plc (AGN.N).
“We think a Depomed sale makes sense if management can drive additional premium by engaging Horizon Pharma and possibly others,” RBC Capital Markets analyst Randall Stanicky said in a note.
Depomed shareholders will hold 25 percent of the combined company, Horizon Pharma said, adding that the deal would bring its revenue close to $1 billion.
Citigroup and Jefferies are Horizon Pharma’s lead financial advisers. Morgan Stanley and Leerink Partners are serving as Depomed’s financial advisors.
Editing by Simon Jennings and Savio D'Souza