CSL offers $16.4bn for Vifor Pharma as Swiss target’s board recommends deal

CSL has lobbed a $16.4bn takeover offer for European firm Vifor Pharma in a transaction that will transform it into a global pharmaceutical giant.

CSL chief executive Paul Perreault, above, says the acquisition will be ‘financially compelling for our shareholders while expanding and diversifying our revenue base’. Picture: Bloomberg

CSL has lobbed a $16.4bn takeover offer for European firm Vifor Pharma in a transaction that will transform the nation’s largest biotechnology company into a global pharmaceutical giant.

The Vifor board has unanimously recommended shareholder accept the offer of $US179.25 a share – the Zurich-based company’s largest investor has already agreed to sell.

To fund the purchase, CSL will raise $6.3bn from investors and up to $8.4bn in new debt.

CSL chief executive Paul Perreault said the acquisition would be “financially compelling for our shareholders while expanding and diversifying our revenue base”.

“Vifor Pharma enhances CSL’s patient focus and ability to protect the health of those facing a range of rare and serious medical conditions,” Mr Perreault said.

The Australian’s DataRoom column first revealed CSL was in exclusive discussions with Vifor – with a portfolio of products including Ferinject, Venofer and Veltassa – on December 2.

CSL confirmed the discussions on Monday, and shares entered an ASX trading halt on Tuesday.

They last traded at $297.27 on Monday, down 0.3 per cent.

CSL said Vifor’s largest investor, Swiss billionaire Martin Eber – who holds a 23.2 per cent stake – had agreed to sell his shares.

Part of the attraction of Vifor for CSL is the chance to expand its portfolio (focused on treatment for haemophilia, primary immune deficiencies and neurological disorders), which is heavily reliant on blood plasma.

Another is Vifor’s partnership with Fresenius Medical Care, which provides kidney dialysis services through a network of ­almost 4000 outpatient centres servicing 340,000 people.

Vifor already has several nephrology and dialysis products in development and expects to launch them in the near term.

The combined CSL and Vifor would have revenues of $12.3bn – $2bn from the European firm. The company would have 37 products across different phases of the development pipeline, representing a 32 per cent increase from CSL’s stand-alone pipeline.

The nephrology market – the treatment of kidney disease progression – is expected to grow to be worth more than $US25bn ($35bn) by 2026.

Mr Perreault said the proposal would bring to CSL “an outstanding team and a leading portfolio of products across renal disease and iron deficiency and a proven partnering and business development and licensing strategy”.

“Vifor Pharma will also expand our presence in the rapidly growing nephrology market, while giving us the opportunity to leverage our complementary scientific expertise,” Mr Perreault said.

“It is expected to be immediately earnings per share accretive and can be executed while retaining our balance sheet strength … Vifor Pharma offers CSL near-term value along with a clear path to long-term sustainable growth.”

CSL was advised by Bank of America and Goldman Sachs.

A previous major Swiss acquisition, Zentrallaboratorium, was made under the watch of former chief executive Brian McNamee, now the company’s chairman.

Former CSL director Abbas Hussain left the company in June to become Vifor’s chief executive.

CSL had previously tried to acquire other major overseas rivals, in 2008 moving on a $3.1bn deal to purchase Talecris Biotherapeutics in a bid that was ultimately scuttled after pressure from US regulators. The company instead announced an on-market share buyback at $29 a share.

However, Mr Perreault will have to convince some equity analysts who were sceptical about the transaction this month.

In a note, Credit Suisse analyst Gretel Janu said the deal “would be a significant shift from its core competency … as well as its core therapeutic areas – immunology, haematology and neurology”.

Macquarie analysts David Bailey and Rachael Harwood told clients in a note that there was “limited obvious product alignment”. They wrote: “As such, the potential strategic rationale for the transaction is not immediately apparent. We are looking for greater detail in relation to the strategic rationale for a potential acquisition.”

The deal represents a 40 per cent premium to the unaffected 60-day trading day volume weighted average price of Vifor Pharma shares as of December 1.

Vifor chairman Jacques Theurillat said his company’s strategy had “been to focus toward continuing being a market leader in iron replacement, nephrology and cardio-renal therapies”. He said: “The offer provides an excellent strategic opportunity for Vifor Pharma to optimise future market opportunities.”

The offer is subject to a minimum acceptance rate of 80 per cent of Vifor shares.

The transaction will be funded by an institutional placement of $6.3bn and a fully committed debt bridge facility of $8.4bn.