Invitrogen (Carlsbad, California) and Applera (Foster City, California) plan to merge in a cash-and-stock deal valued at $6.7 billion, expected to close this fall.
Invitrogen will acquire all of the outstanding shares of Applera's Applied Biosystems group (ABI) to form a combined company, Applied Biosystems, in Carlsbad.
During a conference call Thursday, Tony White, CEO and chairman of Applera, told investors that the Applera board authorized Morgan Stanley in January to consider options to enhance value for shareholders. White said Applera considered three options: continuing to make acquisitions and increase the company's portfolio; restructuring and remaining independent; and selling to another company.
"Today's transaction is a hybrid of the second and third options as we are combining with a very complimentary life science tools provider to create a new company that will have the strengths of each as well as synergies that will make the combination much more than the sum of its parts," White said.
Applera-Applied Biosystems shareholders will receive $38 for each share of Applera-Applied Biosystems stock they own in the form of Invitrogen common stock and cash. The expected split between cash and stock is 45% and 55%, respectively. Applera-Applied Biosystems shareholders will receive a value of $38 a share if the 20 day volume-weighted average price of Invitrogen common stock is in the range of $43.69 to $46 three business days before the close of the transaction. The total value per share will differ if Invitrogen's 20-day, volume-weighted average price is above or below that range, measured shortly before the close of the transaction. The consideration represents a premium of 17% to Applied Biosystems' closing price on Wednesday, or 12% to Applied Biosystems's average closing price in the last 30 trading days. Applera-Applied Biosystems shareholders also will have the option to request all cash or all stock, subject to possible proration. When the deal is complete, Invitrogen shareholders will own the majority of the company.
"Now I recognize that we had our issues a few years ago when we tried to integrate 15 acquisitions onto a very unstable company infrastructure," Greg Lucier, chairman/CEO of Invitrogen, said during Thursday's conference call. "Those investors and analysts that know us well know that our company is a radically different one today than it was three years ago. We have a very solid and stable infrastructure from people to processes to systems. We have a leadership team that has demonstrated that we can deliver upon a significant improvement to company performance in a very short period of time."
Lucier, who will be chairman/CEO of the new company, further attempted to reassure investors by telling them that Invitrogen "could not be in a better position to take on something of this nature."
"Yes, it will be complex; yes, it will be time-consuming; and yes, there will be challenges," Lucier said. "But our team and the ABI team are up for the challenge and I am extremely confident that we can deliver upon our commitment and then some."
According to the companies, the combined firm will generate roughly $3.5 billion in combined sales.
Invitrogen said it would use cash on hand and proceeds from a fully underwritten debt financing from Bank of America, UBS Investment Bank and Morgan Stanley to fund the cash portion of the deal. The combined company expects to generate strong operating cash flow and rapidly pay down debt.
The board of the new company will include nine Invitrogen board members and three Applera board members. Mark Stevenson, president/COO of Applied Biosystems, will be president/COO of the new company.
The new company will have $300 million in R&D spend, representing about 10% of combined revenues, Lucier said, and it will have more than 3,600 patents and licenses.
The combined company will generate more than 70% of its revenue from consumables and services. The deal is expected to generate a run rate of about $125 million in cost savings by the third year of the combination. It is subject to approval by Invitrogen and Applera-Applied Biosystems shareholders, closing conditions, completion of the previously filed separation of Applera's Celera group, and regulatory approvals.
Moelis & Co. and UBS Investment Bank served as financial advisors, and DLA Piper US was legal counsel to Invitrogen. Morgan Stanley served as financial advisor; Morgan Stanley and Greenhill & Co. provided fairness opinions to the boards, and Skadden, Arps, Slate, Meagher & Flom was legal counsel to Applera.
In other dealmaking activity, Eli Lilly (Indianapolis) and TransPharma Medical (Lod, Israel) reported a licensing and development agreement related to TransPharma's ViaDerm-hPTH (1-34) product for the treatment of osteoporosis.
The product, which is administered transdermally, is in Phase II clinical testing.
Lilly will obtain exclusive worldwide rights to ViaDerm-hPTH (1-34) and will also gain non-exclusive access to TransPharma's ViaDerm drug delivery system. TransPharma will receive a $35 million upfront payment, and may also receive development and sales milestones, as well as royalties on sales if a transdermal PTH product is successfully commercialized. TransPharma and Lilly will both fund and participate in phase II clinical development activities. Thereafter, Lilly will be responsible for further development activities and the potential commercialization of any transdermal PTH products. Other terms of the deal were not disclosed.
The transaction is expected to become effective either this month or next, contingent upon clearance under the Hart-Scott-Rodino Antitrust Improvements Act. At closing, Lilly would expect a $0.02 per share charge to earnings for acquired in-process research and development.
TransPharma's ViaDerm drug delivery system incorporates a handheld electronic control unit, which creates microscopic passageways through the outer layer of the skin allowing for transdermal delivery of a wide variety of drugs from a patch. According to the company, the system delivers a range of product candidates, including hydrophilic small molecules peptides and proteins.