GlaxoSmithKline‘s (NYSE:GSK) courtship of Human Genome Sciences (NASDAQ:HGSI) started with a phone call and then a letter on April 11.
GSK CEO Andrew Witty told his counterpart at HGS, Tom Watkins, that the company would offer $13 per share to acquire the Maryland biotechnology company. On that day, HGS stock closed at $7.55 per share. The two companies have been partners for nearly 20 years and an acquisition would bring to GSK full control of new lupus treatment Benlysta as well as other drug candidates. The companies are also partners on experimental diabetes treatment albiglutide and cardiovascular disease drug candidate darapladib. Witty outlined to Waktins the case for a deal and said it made sense for both companies and their shareholders.
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Witty asked for a response by April 19. He got that response today as the company essentially said GSK’s offer was not enough. In confirming its offer for HGS, GSK also provided the text of Witty’s letter to Watkins:
11 April 2012
Dear Tom
This letter follows up on our call earlier today, to formally convey to you the proposal for an acquisition of Human Genome Sciences, Inc. (“HGSI”) that I described in our conversation.
Under our proposal, which has been unanimously approved by our Board of Directors, GlaxoSmithKline plc (“GSK”) is prepared to offer $13 per share in cash for all of the outstanding shares of HGSI common stock. This price represents a 73% premium to the closing price of HGSI common stock of $7.53 on April 10, 2012, a premium of 66% to the thirty day trading average closing price of $7.83 and a premium of 58% to the ninety trading day average closing price of $8.23.
We believe this all-cash transaction is compelling for your shareholders and fully takes into account the value of Benlysta, albiglutide, darapladib and your other assets, as well as the synergies inherent in a business combination. Your shareholders would receive immediate liquidity at a substantial premium to the market’s assessment of HGSI’s value, without further exposure to the significant execution risk and uncertainty relating to achieving future growth and development of your products over many years. Our proposal would deliver immediate certain value to HGSI shareholders that is superior to what we believe you can reasonably expect to create as a standalone company.
GSK and HGSI have collaborated for nearly 20 years, and we greatly respect your history of innovation and what you have achieved. We believe now is the appropriate time in the evolution of our relationship for our two companies to combine and that GSK is uniquely positioned to deliver on the promises of Benlysta, albiglutide and darapladib for the physicians, patients and the respective shareholders that we serve. The logic of this combination is clear for both companies and our respective shareholders.
We believe the acquisition can be completed expeditiously and are prepared to commence a cash tender offer with no financing or due diligence condition. We have retained Lazard and Morgan Stanley as our financial advisors and Cleary Gottlieb Steen & Hamilton LLP and Wachtell, Lipton, Rosen & Katz as our legal counsel, and are prepared to move forward immediately. We are confident that the transaction will promptly receive all necessary regulatory approvals, including antitrust clearances.
We are prepared to deliver a draft merger agreement to you and begin discussions immediately, with the expectation that we and you would be in a position to enter into and announce a definitive agreement within the very near future. We hope to work with you on a friendly basis to complete this transaction successfully and expeditiously, and I would suggest that our respective financial and legal advisors meet at your earliest convenience to work toward this goal.
As I stated to you we value our long relationship strongly and would prefer to continue to engage in a confidential dialogue with you and your Board regarding our proposal, which we believe would be well received by your shareholders. Our Board is fully committed to moving forward with this proposed transaction.
This letter does not represent or create any legally binding or enforceable obligations. No such obligations will be imposed on either party unless and until a definitive agreement is signed by both GSK and HGSI.
We ask that you please respond to this proposal by April 19.
Yours sincerely
Sir Andrew Witty
CEO GlaxoSmithKline
[Photo from stock.xchng user Kriss Szkurlatowski]
