GSK plans to replace HGS’ entire 12-member board with its own slate of nominees, Reuters reports, citing “sources familiar with the situation.” That process will almost certainly extend beyond the June 7 deadline that GSK set when it made its tender offer to acquire HGS for $2.6 billion.
The sources told Reuters that GSK is expected to extend the deadline. In coming weeks, the company will seek shareholder consent to replace the board. In the meantime, GSK has already started reaching out to executives in the pharmaceutical industry and elsewhere to nominate to the HGS board as the British pharmaceuticals giant tries to acquire the Maryland biotechnology company.
Since making its offer in April, GSK has held firm on the price of $13 per share. Replacing the entire board appears to be the British pharma’s remedy to the “poison pill” that the HGS board adopted two weeks ago to fend off a hostile takeover. This shareholders right agreement, which takes effect when GSK acquires a greater than 15 percent stake in the company, allows existing HGS investors to buy shares at a discount and dilute GSK’s holdings. But there are some HGS shareholders who think the company should take GSK’s offer. An investor filed suit last week against the HGS board claiming that the poison pill holds shareholders hostage.
GSK and HGS are partners on lupus drug Benlysta. They are also partners on two drugs in late-stage clinical development; one to treat type 2 diabetes and another for cardiovascular disease. GSK has pointed to that extensive partnership as its justification for being the appropriate acquirer. But HGS has said that the $13 per share does not properly value the company and its drug pipeline. HGS has said that a full strategic alternatives process is needed to find and vet other bidders who could give shareholders a better offer.
GSK declined Reuters request for comment. An HGS spokesman told Reuters: “GSK declined to enter the process and, through its offer, seeks to circumvent, disrupt and prematurely end the company’s process to the disadvantage of (Human Genome) stockholders.”
[Photo from stock.xchng user khaibit]
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