January 30, 2018 / 7:27 AM / 3 months ago

Varian Medical swoops on Australia's Sirtex in $1.3 billion cash deal

SYDNEY (Reuters) - U.S. cancer-treatment company Varian Medical Systems is buying Australian liver-cancer treatment maker Sirtex Medical for $1.3 billion, the latest in a wave of big M&A deals sweeping the global healthcare sector.

Sirtex, whose shares had halved over the past two years until the deal was announced on Tuesday and which swung to a full-year loss after its technology failed in three major tests, recommended the buyout as an “attractive outcome”.

California-based Varian’s offer of A$28 in cash per share was 49 percent above Sirtex’s closing price of A$18.83 on Monday, and comes amid a multibillion dollar shopping spree in the sector as big companies buy their way to growth.

“The bid price is definitely a good premium, I would struggle to see anyone else coming over the top,” said Mathan Somasundaram, Market Portfolio Strategist at stockbroker Blue Ocean Equities, adding the bid was timely.

Sirtex shares jumped 46 percent to A$27.49 on Wednesday to a two-month high in their first trading session since the deal was announced, suggesting investors are confident it will proceed.

Sirtex had written down the value of its research and development projects in June after last year’s poor study results, sacked its CEO after an internal investigation into his trading of Sirtex shares, and still faces two class action lawsuits over alleged disclosure breaches.

New Chief Executive Officer Andrew McLean said on Wednesday that although the board had not run a sale process, it fielded “a number” of unsolicited bids last year.

“We accepted the best and overall bid with the highest price,” he said during a conference call with analysts and investors.

“We believe the risk that this transaction will not complete is very low.”

Varian said in a separate statement the deal is part of its “long-term growth and value creation strategy” and expands its portfolio of radiation medicine. Its shares fell 0.65 percent, in line with the broader S&P 500 index overnight.

A search for growth is driving a spike in big biotech deals, pushing global mergers and acquisitions (M&A) in the sector to $26.3 billion for January, far ahead of any comparable tally for the month in over a decade, according to Thomson Reuters data.

French drugmaker Sanofi has led the charge, with its agreed $4.8 billion purchase of Belgian biotech company Ablynx on Monday, a week after it splashed $11.6 billion on U.S. hemophilia expert Bioverativ.

U.S.-based Celgene is paying $9 billion for cancer specialist Juno Therapeutics.

“These companies are entering this space because they’re cashed up, they have holes in their pipelines...they’re looking for growth and near-term accretive acquisitions,” said Derek Jellinek, an analyst at stockbroker Morgans.

“From a shareholder point of view for Sirtex, party on dude, you’d definitely vote for this.”

The deal, expected to close in late May, is subject to approval from the Foreign Investment Review Board and other competition authorities.

Reporting by Tom Westbrook in SYDNEY; Additional reporting by Chris Thomas in BENGALURU; Editing by Edwina Gibbs and Muralikumar Anantharaman

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