LONDON—With the announcement that it will not beparticipating in Human Genome Sciences' (HGS) strategic review process,GlaxoSmithKline plc (GSK) is going hostile, taking its acquisition offerstraight to HGS' shareholders. GSK will commence its tender offer this week.
GSK first made its acquisition offer last month, offering$13 per share in cash, an 81-percent premium over the closing price of HGS'shares on April 18, for an aggregate total of approximately $2.6 billion. HGSresponded with its refusal on April 19, claiming the offer "does not reflectthe value inherent in HGS." The company went on to announce that its board ofdirectors had authorized a strategic alternatives review process to determinethe best direction for the company, bringing on Goldman, Sachs & Co. andCredit Suisse Securities (USA) LLC as financial counsel and Skadden, Arps,Slate, Meagher & Flom LLP and DLA Piper LLP (US) as legal counsel. HGSinvited GSK to take part in the process, requesting additional informationregarding products in GSK's pipeline to which the companies share financialrights.
"Having worked together with Human Genome Sciences fornearly 20 years, we believe there is clear strategic and financial logic tothis combination for both companies and our respective shareholders – and thatnow is the appropriate time in the evolution of our relationship for our twocompanies to combine," said Sir Andrew Witty, CEO of GSK, in a press releaseabout the initial offer.
GSK has chosen not to participate in the strategicalternatives review process for a number of reasons. The company feels that itsparticipation is unnecessary since the offer is not conditioned on duediligence, and noted that the four weeks that have passed since the offer wasmade on April 11, plus the 20 business days the tender offer has to stay openfollowing commencement, "provides a reasonable amount of time for HGS tocomplete its review of alternatives." GSK noted in a press release that "it isimportant for HGS shareholders to understand that GSK is committed toproceeding with its offer," and that "there is clear strategic and financiallogic to this combination and HGS shareholders should have the opportunity todecide for themselves on the merits of the offer."
The company also noted that it believes it is "uniquelypositioned to deliver on the promises of Benlysta, albiglutide and darapladib,"and that it would prefer to have the acquisition be a friendly and timelytransaction.
HGS responded by announcing that its board of directors,together with its financial and legal counsel, will carefully review the offer,adding that it plans to share its recommendation with shareholders within tenbusiness days. The company added a note that "the proposed $13.00 per shareoffer price is identical to the price of the proposal received from GSK onApril 11, 2012 that HGS determined does not reflect the value inherent in HGS."HGS' strategic alternatives review process is still ongoing, the companyannounced.