MADRID (Reuters) - Spain’s Grifols (GRLS.MC) has agreed to buy U.S.-based Talecris Biotherapeutics TLCR.O, which makes plasma-based protein medicines, for $3.4 billion in a bold move to expand its business in blood-derived products.
The cash-and-shares deal — the third largest in the pharmaceutical sector this year and worth over a billion dollars more than Grifols itself — will add market share in the United States and Canada to the Spanish healthcare company’s leading position in Europe.
All these named firms make treatments derived from donated blood plasma for use in patients with a range of conditions, including hemophilia and immune system deficiencies.
Barcelona-based Grifols said on Monday it expected about $230 million of annual synergies from the deal.
The deal, which is the fifth largest European acquisition of a U.S. firm this year, would be earnings per share (EPS) positive from the first year and raise EPS by 30 percent by year two, it said. Grifols’ move will also help it meet growing demand in emerging markets.
The family-controlled company is paying a high price for Talecris, with its cash and stock offer representing a 53 percent premium to the 30-day average Talecris share price.
Talecris, which went public in October, was formed in 2005 when Germany’s Bayer (BAYGn.DE) sold its blood products unit to private equity groups Cerberus and Ampersand for $590 million.
The deal represents a sweet return on investment for Cerberus, following earlier ill-fated investments in Chrysler and GMAC. The private equity house controls an affiliate that still owns some 49 percent of Talecris.
Concerns over price and potential snags over regulatory approval and realizing synergies drove Grifols shares down 8.5 percent to 8.48 euros, after touching a 3-1/2-year low of 8.32, in a Spanish stock market .IBEX which was 1.6 percent lower.
“They’re paying a hefty premium to the market price which markets may not be keen on rewarding in the short term,” said Dirk Schnitker, analyst at CM Capital Markets in Madrid.
“But it’s a good strategic move for the medium-long term, and one they wouldn’t have taken without doing their homework.”
Talecris’ 2008 deal to merge with larger rival CSL was terminated last year under pressure from U.S. antitrust regulators.
JP Morgan analyst Michael Weinstein said it remained to be seen whether the smaller deal with Grifols — creating a player with about a third of the U.S. market — would be approved, given the Federal Trade Commission’s concerns about sector consolidation.
But the Spanish company’s chief executive told analysts he did not expect regulatory difficulties, with U.S. approval expected by the end of this year.
“Grifols is much smaller than CSL in the United State,” Victor Grifolssaid on a conference call.
Grifols is offering $19.00 in cash and 0.641 newly-issued non-voting Grifols’ shares for each Talecris share, implying a price of $26.16 per Talecris share based on June 4 stock prices.
Talecris shares rose 24 percent to $19.75 in morning trade on Nasdaq, a shortfall to the implied takeover price that reflected Grifols share price fall and also anti-trust uncertainty.
Grifols said the total implied offer value was $3.4 billion, or $4.0 billion including net debt. Grifols will issue up to 84 million new shares worth about $900 million for the stock part of the deal.
The combined company will have annual revenue of some $2.8 billion, with 58 percent coming from North America, 28 percent from Europe and 14 percent from the rest of the world.
Grifols said the transaction’s financing was fully committed by a syndicate of banks led by Deutsche Bank, Nomura, BBVA, BNP Paribas, HSBC and Morgan Stanley.
The Spanish group’s net debt will be five times earnings before interest, taxes, depreciation and amortization (EBITDA) initially but Grifols expects its debt ratio to fall to three times EBITDA by the end of 2012 and to below two times by the end of 2014.
Nomura and BBVA advised Grifols, while Morgan Stanley, Citi and Natixis acted for Talecris.
Adviser fees were not disclosed, but Freeman & Co., a consultancy, estimated about 12-16 million pounds for the Grifol side and 18-22 million for Talecris.
The deal is expected to close in the second half of 2010.
Additional reporting by Megan Davies and Jessica Hall in New York and Philadelphia; Writing by Ben Hirschler; Editing by Louise Heavens and Andrew Callus