CSL to argue its case for Vifor Pharma acquisition

Inside the CSL factory at Broadmeadows in outer northern Melbourne. Picture: Tim Carrafa

Hot on the heels of announcing its mammoth $16.4bn acquisition of Vifor Pharma, CSL will now be focused on selling the deal to investors.

The group came out late on Tuesday and told the market the $16.4bn transaction would be accompanied by an equity raising comprising a $6.3bn fully underwritten placement and a $750m share purchase plan, as largely expected.

The raise is set to fly out the door, but shareholders will still be keen to hear the justification for it paying $US179.25 a share for the business – a premium of about 40 per cent.

The 40 per cent premium relates to Vifor’s unaffected 60-day trading day volume-weighted average share price as of December 1 – the day before this column revealed that CSL was in exclusive talks to buy the business.

Vifor Pharma’s shares were at about $US113 before the news broke, then moved up to about $US179. But in late November, they were about $US135.

While a 40 per cent premium may seem large, CSL and its advisers will be arguing that one has to put it into perspective.

Pharma companies are currently selling for astronomical premiums in the Covid-19 world, as evidenced by Pfizer’s announced acquisition this week in the US. Pfizer says it is buying Arena Pharmaceuticals for $US6.7bn, a 100 per cent premium to its last traded share price.

CSL has told the market the acquisition will be low-to-mid-teens net profit after tax and amortisation accretive from the first year of ownership, which will assist in justifying the price.

Shares for the placement were being sold through a bookbuild, which had a floor price of $273. The top of the book is $285 a share.

The discount to the last closing price on December 13 is 8.2 per cent at its floor, with CSL shares also recently rallying on news about its Vifor deal – its largest ever.

The $136bn CSL will barely break stride after funding the transaction, which will see it also use $8.4bn of debt and existing cash.

The deal is good news for investment banks involved, as they wrap up what has been one of the largest years for mergers and acquisitions in Australia on record.

Working for CSL as lead financial adviser is PJT Partners, while Bank of America and Goldman Sachs are advising – as earlier flagged by DataRoom – and Gresham is offering independent advisory to CSL’s board while Credit Suisse is also a financial adviser in Switzerland.

It is thought that CSL opted to move this week on an equity raising because of a recent rally in its share price.

Vifor specialises in treatments for iron deficiency and renal treatment and has been branching out into treatments for heart failure.

Swiss billionaire Martin Ebner holds 20 per cent of the business, and he has given his support for the transaction.

CSL is a biotechnology company that develops products to treat and prevent serious medical conditions.

It uses human plasma to produce treatments for bleeding disorders including haemophilia and von Willebrand disease, primary immune deficiencies, hereditary angioendema, inherited respiratory disease and neurological disorders.