Complete Genomics Inc. to be acquired by Chinese firm BGI-Shenzhen for $117.6 million

The combination of the companies’ scientific and technological expertise and R&D capabilities is expected to be complementary, but Complete Genomics will continue to be operated as a separate company with headquarters and operations remaining California

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MOUNTAIN VIEW, Calif. and SHENZHEN, China—CompleteGenomics Inc., a whole-human genomic sequencing company, and BGI-Shenzhen, aleading international genomics company based in China, announced inmid-September that they had entered into a definitive merger agreement. Basedon the number of fully diluted outstanding shares of Complete Genomics, theaggregate value of the transaction is approximately $117.6 million. In addition,Complete Genomics and an affiliate of BGI have entered into an agreementpursuant to which Complete Genomics will be provided with as much as $30million in bridge financing for its operations following the signing of themerger agreement.
Complete provides whole-human genome sequencingthat is one day expected to become a mainstay of disease diagnosis andtreatment, while BGI operates international genome sequencing centers thatsupport genetic research into agriculture, animals and humans. The combinationof the two companies is expected to bring together complementary scientific andtechnological expertise and R&D capabilities, but the companies will notmerge into one unit. Instead, Complete Genomics will continue to be operated asa subsidiary company and its headquarters and operations will remain inMountain View, Calif.
"Complete has developed a proprietary wholehuman genome sequencing technology that, together with other sequencingplatforms used by BGI, will fit well with our research and businessrequirements and position Complete to become an even more successful globalinnovator," said BGI's CEO, Dr. Wang Jun. "We look forward to growing thebusiness to improve medical research and, when clinical services are provided,support better disease diagnosis with tools that can be used by doctors andhospitals to treat their patients."
The acquisition announcement comes a little morethan three months after Complete Genomics said it was restructuring—a processthat resulted in more than 50 layoffs—and doing a review of strategicalternatives that, at the time, ran the gamut from a merger to a businesscombination to an equity investment to a sale.
"With the assistance of our advisors, weengaged in a thorough review of a broad set of possible alternatives for thecompany, and we believe the transaction with BGI represents the best outcomefor our stockholders, offering them liquidity and a premium value," saidDr. Clifford Reid, chairman and CEO of Complete Genomics. "In addition, itoffers a great outcome for our customers, present and future. The combinationof the companies' resources provides an opportunity to accelerate our vision ofproviding researchers and physicians with the genomic information needed toprevent, diagnose, and treat cancers and other genetic diseases."
Complete Genomics' board of directors hasunanimously recommended that stockholders accept the offer and tender theirshares. BGI's acquisition offer represents approximately a 54-percent premiumto the $2.04 closing price per share of Complete common stock on June 4, thelast trading day prior to the California company's announcement that it wasundertaking an evaluation of strategic alternatives.
BGI had already been on the lookout for a U.S.sequencing base before Complete Genomics essentially put itself up on the auction block, but with this acquisition, that goal to get a foothold in theUnited States is accelerated, wrote Isaac Ro, a Goldman Sachs analyst, in anote about the deal, "giving BGI an immediate infrastructure and serviceoffering that will complement the facilities in China."
Ro noted that BGI is tied significantly in termsof infrastructure to informatics and workflow technology from Illumina Inc.—acompetitor to Complete Genomics—but he doesn't predict that BGI will shut downexisting Illumina labs in China but rather run them in parallel with the Complete Genomics facilityin California and its rival technology.
On the other hand, reporting by Bloomberg aboutthe deal points out that while Complete Genomics's sequencing technology givesresults slower than that of Illumina, studies have shown that the it is moreaccurate than Illumina's technology, and some market-watchers believe BGI wouldlike to have some leverage over other vendors—leverage that having its ownin-house sequencing platform might provide.

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