Glaxo wins HGS approval after lifting its bid

Week-end reports that Anglo-American drugs giant GlaxoSmithKline was close to sealing a takeover of US peer Human Genome Sciences (HGS) have proved correct, with the UK company lifting its offer terms to secure approval from the HGS board.

Glaxo is offering $14.25 a share for HGS in a deal which values the US firm at $3.6bn. Once HGS's cash position is taken into account the final cost to Glaxo will be around $3bn in cash.

In order to get the backing of HGS's board Glaxo is paying almost double the price at which HGS shares were trading before the US company revealed on April 18th that it had been approached by Glaxo.

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That bid approach was rejected "without discussion" by the HGS directors, so Glaxo took its offer directly to shareholders with a $13 a share offer.

The two companies have collaborated for a long time in the past, not least on the lupus treatment Benlysta, and the decision by Glaxo to go over the heads of the HGS directors and take its offer directly to shareholders was probably one reluctantly taken; now the two companies have kissed and made up.

"After a thorough analysis of strategic alternatives, HGS has determined that a combination with GSK [Glaxo] is the best course of action for our company and the best way to maximise value for our stockholders," claimed Thomas Watkins, the President and Chief Executive Officer of HGS.

"HGS has had a long and productive working relationship with GSK, and together we will be uniquely positioned to achieve the full potential of BENLYSTA and other products in our pipeline for the benefit of those battling serious disease around the world," Watkins added.

Noting that the transaction meets Glaxo's strict financial criteria for acquisitions, Sir Andrew Whitty, the Chief Executive Officer of Glaxo, said the merger is expected to deliver significant returns over the long-term. "This is a natural next step in our nearly 20-year relationship with HGS, and we look forward to working with HGS to integrate our businesses and to realising the full value of BENLYSTA, albiglutide, and darapladib for the benefit of patients and our shareholders," Whitty said.

Glaxo's shares were barely changed after the announcement.

JH