Bioverativ(BIVV) To Be Acquired By Sanofi(SNY) At Huge 64% Premium

It was just one year ago when Biogen(BIIB) spun off hemophilia and blood disorder specialist Bioverativ(BIVV). With the stock trading in the 40s post-spin, we highlighted some disparate analyst opinions of the spin. The most bullish, Gabelli & Company, has a price target of $58 for Bioverativ stock.  This past Friday, Bioverativ stock closed at $64.11, above Gabelli’s target, but in the same ballpark. That is all set to change when the market opens this morning.

Reports arose yesterday that Sanofi(SNY) is near a deal to purchase Bioverativ for $105 per share in cash, a 64 percent premium to Friday’s close. Early this morning, Sanofi issued a press release confirming the deal. This represents a huge win for spinoff investors, who have also benefited from a rise in Biogen stock over the past year. Biotech spinoffs have been particularly successful and quick to be acquired. Readers will recall Baxalta’s acquisition by Shire(SHPG) soon after its own spinoff, as well as the great performance of AbbVie(ABBV).

The deal is expected to close quickly, with a tender offer for shares commencing next month.

Under the terms of the merger agreement, Sanofi will commence a tender offer to acquire all of the outstanding shares of Bioverativ common stock at a price of $105 per share in cash.  The $105 per share acquisition price represents a 64 percent premium to Bioverativ`s closing price on January 19, 2018.

The consummation of the tender offer is subject to various conditions, including the tender of at least a majority of the outstanding Bioverativ shares, redelivery of a tax opinion delivered at signing, the expiration or termination of the waiting period under the Hart Scott Rodino Antitrust Improvements Act and receipt of certain other regulatory approvals, and other customary conditions.  Following the successful completion of the tender offer, a wholly owned subsidiary of Sanofi will merge with Bioverativ and the outstanding Bioverativ shares not tendered in the tender offer will be converted into the right to receive the same $105 per share in cash paid in the tender offer. The tender offer is expected to commence in February 2018.

Sanofi expects the deal to be accretive to earnings beginning this year.

The addition of Bioverativ is expected to drive meaningful value for Sanofi`s shareholders, with strong cash flows from Bioverativ`s growing products expected to increase Sanofi`s financial and operational scale. The acquisition is expected to be immediately accretive to Sanofi`s Business EPS in FY2018 and up to 5% accretive in FY2019. Sanofi is also projected to achieve ROIC in excess of cost of capital within three years. Sanofi expects to preserve its strong credit rating.

This is a great outcome for Bioverativ investors who get paid a great price for their shares despite potential challengers arising in the company’s core hemophilia market. It remains to be seen whether this will truly benefit Sanofi shareholders given the rich price being paid for Bioverativ.

Disclosure: The author holds no position in ay stock mentioned.