Gen-Probe (San Diego) said yesterday it has launched a conditional tender offer to acquire 100% of the outstanding shares, warrants and convertible bonds of Innogenetics (Ghent, Belgium), a molecular diagnostics company, for about €215 million ($334 million) in cash. Innogenetics shareholders will receive €6.10 a share in cash, or roughly €188 million ($292 million), the company said.
According to Gen-Probe, the combined entity would be the largest stand-alone molecular diagnostics company in the world, with pro forma 2008 sales in excess of $500 million. The combined company would offer a broad range of nucleic acid and immunoassay tests to identify bacterial and viral infectious diseases, genetic and neurological disorders, transplant compatibility and cancer. These tube- and strip-based products could be sold to customers worldwide, the company said.
"For the last couple of years we have been using a thorough, rigorous process to analyze potential acquisition targets. In fact, we have been talking to Innogenetics since last summer, and believe the company is a very good strategic fit, for a number of reasons," Hank Nordhoff, Gen-Probe's CEO and chairman, said during a company conference call yesterday. "We expect acquiring Innogenetics would jumpstart our efforts to expand our sales, marketing, distribution and manufacturing infrastructure in Europe, thereby helping us accelerate commercialization of our own products, increase top-line revenues, and better control our own commercial destiny."
Nordhoff said acquiring Innogenetics would also give Gen-Probe access to complementary products, technologies and instrumental platforms that the company can use to drive longer-term growth.
But Gen-Probe is not the only company trying to acquire Innogenetics. Belgian company Solvay Pharmaceuticals made a conditional €5.75 a share offer for the molecular diagnostics company in April.
Gen-Probe's offer represents a 7% premium to Innogenetics' per share closing price Tuesday of €5.71, a 6% premium to Solvay's offer, and a 41% premium to Innogenetics' unaffected average share price of €4.33 in the three months prior to the announcement of Solvay's offer.
"We are clearly in a counterbid situation, where a lower-value deal has already been proposed to Innogenetics shareholders. With another bidder already in this process, we obviously cannot predict the ultimate outcome of the counterbid we are making today," Nordhoff said. "If Solvay decides to bid more than we believe we can justify for Innogenetics, we would be happy to continue building our core clinical diagnostics and blood screening businesses, which I should mention remain very healthy thus far in the second quarter."
Nordhoff also said that Gen-Probe would continue to look at other potential acquisition targets if it lost the bidding war.
"We believe our offer represents full and fair value for all Innogenetics shareholders, while providing additional value over the offer recently made by Solvay," Nordhoff said. "Moreover, we believe Gen-Probe's well-established expertise and track record in molecular diagnostics would offer Innogenetics' customers and employees the best opportunity for long-term success."
Innogenetics' key diagnostic products include CE-marked genotyping assays for infectious diseases such as hepatitis C and B, and human papillomavirus. The company also sells genetic tests for cystic fibrosis and tests for human leukocyte antigens that are used to establish tissue compatibility in organ transplants. Innogenetics recently received CE marking for its first assay on its 4-MAT microarray platform. Innogenetics holds a PCR license from Roche (Basel, Switzerland) and an xMAP multiplex technology license from Luminex (Austin, Texas). Innogenetics recently reported a restructuring and closure of its therapeutics subsidiary, GENimmune, in order to focus on diagnostics product opportunities.
Gen-Probe has filed a draft takeover prospectus with the CBFA, Belgium's Banking, Finance and Insurance Commission. The proposed acquisition is expected to close in 4Q08, subject to closing conditions, including an acceptance threshold of at least 90% of the outstanding shares of Innogenetics, or 75% of Innogenetics' articles of association are modified to remove voting restrictions and introduce a 'one share, one vote' principle, Gen-Probe said.
Net of cash and other debt, the enterprise value of Gen-Probe's offer amounts to about €219 million ($340 million) and is roughly 4.3 times Innogenetics' diagnostics revenue of €51 million in 2007. Gen-Probe expects to finance the deal with cash currently on its balance sheet.
On a GAAP basis, Gen-Probe expects the proposed acquisition to become accretive to its earnings per share within 18 months of closing, and to be slightly dilutive to 2009 EPS.
On a non-GAAP basis, excluding acquisition-related charges and the expected increase in depreciation and amortization expense from acquired assets, Gen-Probe expects the proposed acquisition to be slightly dilutive to non-GAAP EPS in 2008, and neutral to slightly accretive to non-GAAP EPS in 2009.
UBS Investment Bank is acting as financial adviser to Gen-Probe on this transaction, and Linklaters and Cooley Godward Kronish are serving as legal counsel.
A financial analyst with Lazard Capital Markets wrote in a research report that the acquisition is strategic, as Gen-Probe attempts to build out its diagnostic international footprint and that Innogenetics should enhance the company's presence in Europe, "but the U.S. will likely take time."
Innogenetics makes diagnostic products intended to improve therapy management and patient health.
Gen-Probe makes nucleic acid tests that are used primarily to diagnose human diseases and screen donated human blood.
In other dealmaking activity, MedAssets (Atlanta) said it has completed the acquisition of Accuro Healthcare Solutions (Dallas) for about $207 million in cash and 8.85 million shares of MedAssets common stock, plus an additional $20 million in cash or shares on the first anniversary of the closing. The acquisition expands the depth and breadth of MedAssets' revenue cycle management solution suite, which focuses on helping hospitals and health systems achieve significant and sustainable cash flow and operating margin improvement.
The deal was first disclosed last month (Medical Device Daily, May 1, 2008).
MedAssets funded the cash portion of the deal with cash on hand, a $50 million expansion of its term loan credit facility and borrowings under its existing revolving credit facility.