LONDON - Talecris Biotherapeutics Holdings Corp. is falling into the arms of Spain's Grifols in a $3.4 billion deal agreed on just one year after the Federal Trade Commission said Talecris could not merge with another of its fellow plasma protein providers, CSL Ltd.
The deal, coming just eight months after Talecris' $950 million initial public offering, will see Grifols acquire the Research Triangle Park, N.C.-based company for a combination of cash and 85 million newly issued nonvoting shares. (See BioWorld Today, Oct. 2, 2009.)
That will create the world's third-largest plasma derivatives producer, with different product ranges, which means the merged company will be able to extract more protein therapies from each liter of plasma collected. Those products are relevant to neurological, immune, pulmonary and hematological disorders, among others.
The merger also brings together two R&D pipelines that include a number of recombinant products, stem cells and programs in ischemic stroke, Alzheimer's and chronic liver diseases. Grifols CEO Victor Grifols said in a conference call that there are two opportunities in terms of R&D for the merged company - in finding new indications for existing products and finding new therapeutically useful proteins in plasma.
"In 1975, I remember being told there were 30 proteins in plasma; by the end of 1990, that increased to 300 proteins. [Now] the number is more than 3,000. If they are present, there must be a reason, so the R&D prospects in future are unbelievable," Grifols explained.
On the face of it, that is a compelling deal for Talecris shareholders, who are offered $19 in cash and 0.641 of a new Grifols share for every Talecris share they hold. Based on the closing price of $16.47 on Friday and prevailing euro/dollar exchange rates, that values Talecris shares at $26.16 each, a premium of 53 percent to the average closing price in the last month.
In last October's IPO, 50 million Talecris shares were priced at $19 million, and traded up 11.3 percent to $21.15 in the first day of trading. They reached $24 per share in February, before falling back to below the IPO price.
The newly issued shares will be listed on Nasdaq and the Spanish market Mercado Continuo. Grifols has all the financing in place for the transaction, provided by a syndicate led by Deutsche Bank, Nomura, BBVA, BNP Paribas, HSBC and Morgan Stanley.
In addition to the premium, Talecris CEO Lawrence Stern said having part of the consideration in stock means Talecris stockholders "can participate in the significant growth potential of the combination."
The boards of both companies have agreed on the deal, as has Cerebrus Capital Management LP, the private equity firm that still owns 49 percent of Talecris following its $450 million leveraged buyout from Bayer AG in 2005.
This is the second time Cerebrus has tried to sell Talecris. Exactly a year ago a $3.1 billion merger with Australian biotech CSL Ltd., which would have created the second largest plasma-derived therapeutics companies in the world after Baxter Inc., was upended by the FTC. (See BioWorld Today, June 9, 2009.)
The FTC objected that the combination of Talecris and CSL would substantially reduce competition in the U.S. market for immunoglobulin, albumin, Rho-D and alpha-1. In 1990, there were 13 plasma protein companies in the U.S., and by 2009, there were five. The FTC said a Talecris/CSL merger would have left CSL and Baxter accounting for more than 80 percent of the U.S. market for immune globulin and albumin.
While a merger with Grifols has the same effect of reducing the number of large companies in the U.S. from five to four, Grifols' strong presence in Europe means the deal has less impact on market share in the U.S. In 2009, 47 percent of the Barcelona, Spain-based company's revenue came from Europe, 32 percent from the U.S. and 21 percent from the rest of the world. Acquiring Talecris will be a huge boost to Grifols' U.S. presence, and shareholders are promised operating synergies of $230 million per annum.
Talecris meanwhile derived 66 percent of its 2009 $1.5 billion revenues in the U.S. and 12 percent in Europe, where it has operations in Germany.
On the basis of 2009 revenues, a Talecris merger with CSL would have created a company with $5.457 billion, on almost equal terms with market leader Baxter, which had revenues of $5.573 billion. The Grifols-plus-Talecris combination will have revenues of $2.8 billion.
Victor Grifols said in the conference call that he does not expect the deal to fall foul of the FTC. "We are a much smaller competitor than CSL. We do not see any conflict that will make the FTC uncomfortable."
On the one hand, the merger creates a stronger third force in the U.S. market; on the other, the combination of Talecris and Grifols does not give the merged company a dominant market share in any individual product line. "We think and we feel this will make a difference. In the opinion of experts, we should pass this hurdle."