TOKYO (MarketWatch) — Dainippon Sumitomo Pharma Co. said Thursday it is offering $2.6 billion to buy U.S.-based Sepracor in a move the Japanese drugmaker expects will enhance its sales and marketing capability in the United States.
Dainippon (4506) announced the cash tender offer for Sepracor at $23 a share, representing a 27.6% premium over the closing price of Sepracor’s
common stock on Sept. 1. Word of a pending deal, however, had sharply boosted Sepracor shares Wednesday, which rose 26.5% to $22.80.
The bid for Sepracor marks Japan’s third-largest outbound, cross-border deal on record in the drugs/pharmaceuticals sector — behind Takeda Pharmaceutical’s (4502) $8.4 billion acquisition of Millennium Pharmaceuticals in April 2008 and Daiichi Sankyo’s (4568) $5.5 billion purchase of a 58.1% stake in Ranbaxy Laboratories in June last year, according to Dealogic.
Sepracor also confirmed the agreement with Dainippon, adding that the transaction was unanimously approved by the boards of both companies.
Dainippon said Sepracor will become a wholly-owned subsidiary of Dainippon Sumitomo Pharma American Holdings, headquartered in New Jersey.
The Japanese pharmaceutical company is “following the trend of its peers taking advantage of a strong yen and using that leverage to garner new drug pipelines in addition to strength in R&D and sales force in target markets,” said Brett McGonegal, managing director at Cantor Fitzgerald.
The “acquisition will also give Dainippon access to Sepracor’s 1,000-person strong sales force, which can help market its schizophrenia treatment Lurasidone,” he said.
“The sales force would give them a great presence in the world’s largest pharma market.”
Shares of Dainippon Sumitomo Pharma closed 1.2% higher Thursday in Tokyo.
The trend in the pharmaceutical market is clearly leaning toward “joining forces of the big pharma machine with the promising pipelines of the biotech firms,” said McGonegal.
“With many large pharma companies confronted with blockbuster drugs coming off patent and dwindling pipelines, there is a need to gain access to new drugs and new business lines.”
Ben Potter, research analyst at IG Markets in Melbourne, said current conditions are good for such mergers and acquisitions.
“For those companies with the financial strength, now is a perfect time to be considering long-term purchases as you’re paying bottom of the cycle multiples,” Potter said.
“You only have to look at a long-term chart of Sepracor to see that the stock is very low on a historical basis,” he said.
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