(RTTNews) - Continuing the tempo of the previous week, and perhaps signaling a shift of focus to the first quarter financial reporting season, the week ended April 11 unfolded only a few major deals, and majority of them involved drug or medical devices makers.
Japanese drug maker Takeda Pharmaceutical Co. Ltd. revealed one of the biggest acquisitions, announcing a $8.8 billion agreement to buy blood cancer drug maker Millennium Pharmaceuticals, Inc. With its eyes fixed on the biosurgery market, Kinetic Concepts, Inc. disclosed that it agreed to acquire LifeCell Corp. for $1.7 billion in cash. Swiss drug maker Novartis AG also said it agreed to buy a 24.85% stake in Alcon Inc., by paying $11 billion.
Some of the other related announcements came from Devon Energy Corp., Nuance Communications, Inc., EMC Corp., St. Jude Medical, Inc., Danka Business Systems PLC and TriZetto Group.
With the objective of entering the fast-growing biosurgery market, medical technology company Kinetic Concepts, Inc.
(KCI) said on Monday that it agreed to acquire LifeCell Corp.
(LIFC) for $1.7 billion in cash.
In the pre-market hours, LifeCell stock surged over 16% on the buyout news. The stock that closed Friday at $43.15, opened Monday's regular trade at $50.50, reached a high of $50.55, before closing at $50.41 on 20.24 million shares. KCI closed Monday's trade at $49.57, up from the previous close of $47.02, on 3.61 million shares.
As per the agreement, Kinetic Concepts will pay $51 per LifeCell share. This marks an 18% premium to LifeCell's closing price on April 4 and a 26% premium over the 90-day volume weighted average trading price. Boards of both companies have unanimously approved the transaction.
Once the deal is completed, LifeCell will operate as a new global biosurgery division within Kinetic Concepts. The transaction is expected to be initially dilutive to cash earnings per share. It is estimated to become accretive to cash earnings per share during 2009 and significantly accretive in 2010 and thereafter. On a GAAP basis, the deal is expected to become accretive to earnings per share in 2010.
The merger is also expected to diversify Kinetic Concepts' future revenue. The acquisition would bring LifeCell's best-seller AlloDerm, made from recovered human tissue and used in breast reconstruction, in to the fold of Kinetic Concepts. AlloDerm generated $167 million in revenue for LifeCell last year.
Kinetic Concepts, the maker of wound-care devices, would be additionally benefited by LifeCell's new product Strattice, which is believed to have the potential to transform the tissue regeneration industry.
On Tuesday, Wachovia Securities upgraded Kinetic stock to 'Outperform' from 'Marketperform', while reducing their estimates for the company, reported newratings.com. Reflecting the expected dilution from the LifeCell acquisition, the analysts reduced their earnings per share estimates for the company from $3.88 to $3.44 and from $4.41 to $3.85, for 2008 and 2009 respectively, yet said that the market share losses and pricing pressure at the company's VAC business are likely to be less severe than what the current valuation of the company's stock reflects. As for LifeCell, a Piper Jaffray analyst on Tuesday downgraded the stock to 'Neutral' from 'Buy.'
Swiss drug maker Novartis AG
(NVS) on Monday said it agreed to buy a 24.85% stake in Alcon Inc.
(ACL), the world's largest and most profitable eye care company, from Nestlé S.A. (NSTR.L, NSRGF.PK, NSRGY.PK) for $143.18 per share or $11 billion in cash. Novartis will also have the right to acquire Nestlé's remaining 52% stake in Alcon for a fixed price of US$ 181 per share, amounting to about US$ 28 billion.
Novartis, which so far in the year lost 17%, fell 75 centimes or 1.4%, to 51.65 Swiss francs at the close of Zurich trading. Nestle rose 5 francs or 1%, to 516.5 francs. Alcon shares closed Monday's regular trade on NYSE at $150.63 on 1.45 million shares. The stock opened the trade at $154.89, higher from the previous close of $148.44.
A two-step transaction will make Novartis the majority shareholder of Alcon with 77% stake or 298.1 million shares as of April 4, 2008. Following the deal, Alcon will become a majority-owned subsidiary of Novartis. Novartis intends to use cash reserves and loans of $5.5 billion to finance the purchase.
The deal will help Novartis reduce reliance on pharmaceutical products. The company is already faced with product delays and generic competition. Acquiring all the Alcon shares from Nestle, will make Novartis the world's biggest maker of eye-care products, including contact lenses and treatments for glaucoma.
Karl Heinz Koch, an analyst at Bank Vontobel AG in Zurich, thinks this is an attractive deal at attractive conditions, reported Bloomberg. He feels the agreement fits into the strategy of further diversification. Novartis will be able to count on cash flow long term, and that makes it attractive, Koch added.
Standard & Poor's on Monday reduced Novartis' long-term corporate credit rating to AA- from AAA, basing the decision on the unexpected change in the company's financial policy. Moody's Investors Service also cut Novartis to Aa2 from Aaa.
Privately-held ratings and research firm Nielsen Co. on Monday said it has agreed to acquire IAG Research, Inc., which measures consumer engagement with television programs, national commercials and product placements, for $225 million. The deal is expected to be completed in the second quarter of 2008.
The acquisition will be effected through a merger of privately-held IAG with a wholly-owned subsidiary of Nielsen, in which IAG stockholders will receive cash for their IAG shares. Nielsen currently intends to finance the transaction through issuance of notes, existing facilities and cash on hand. After the merger, the executive team of IAG will join Nielsen.
Devon Energy Corp.
(DVN) on Tuesday said it agreed to sell its oil and gas business in Equatorial Guinea to GEPetrol, the national oil company of Equatorial Guinea, for $2.2 billion, effective January 1, 2008. DVN closed the day's regular trade at $110.84, up from the previous close of $108.44, on 4.01 million shares.
The deal is expected to be completed by May 30, 2008. The company targets its after-tax proceeds to be about $1.7 billion. Devon has been selling off its assets in West Africa, and had said it hoped to complete the divestitures by mid-year.
Devon's principal asset in Equatorial Guinea is its 23.75% participating interest in the Zafiro offshore oil field, which has estimated proved reserves of 55 million barrels. The company's share of production from that field is currently about 20,000 barrels per day. Other assets that are part of the deal include stakes in two undeveloped offshore blocks.
Digital imaging software products developer Nuance Communications, Inc.
(NUAN) revealed on Tuesday that it agreed to buy eScription for about $400 million in cash and stock. eScription provides computer aided medical transcription technology. The transaction is expected to close in Nuance's fiscal third quarter 2008.
The purchase cost includes $340 million in cash and $23 million in Nuance stock. Nuance will also assume $37 million in eScription employee stock options.
Nuance, also a speech recognition software maker, expects the deal to enhance its ability to provide advanced transcription solutions.