I’ve mentioned before the example of the acquisition of Viralytics but thought it might be worthwhile mentioning again for those who are new or those who mightn’t recall. There haven’t been too many acquisitions of ASX-listed biotechs so it’s possibly informative to look at one example.
In February 2018, Merck acquired AXS-listed cancer virotherapy biotech, Viralytics (VLA). Its offer, which was recommended by the Board and subsequently accepted by 90% of shareholders, was $1.75 per share (AU$502 million), which represented a 160% premium to its one month VWAP and 185% premium to its previous day closing share price of $0.61.
MSD (Merck) was not unknown to VLA – the two companies had entered into a clinical trial collaboration in late 2015.
While the media was happy to label the deal as a triumph (based on the announced premium), as can be seen from the chart below, in February 2016, a few months after the collaboration with Merck commenced, the share price had already reached $1.27. The share price then steadily fell by 50% until the time of acquisition, despite nothing but positive clinical results during this period and against a background 20% increase in the ASX Small Companies Index over the same period.
View attachment 6229509No warning of takeover talks had been given. Shareholders were caught by surprise although there had been much discussion on HC prior to the announcement about algorithmic trading and perceived manipulation of the share price and questioning of what it meant. Those who had just recently bought in were happy and did very well. However, longer term holders were less than impressed. Below are a few of the comments at the time
Classic Vulture bid. Share price gets wacked down to 62 cents, and suddenly a saviour bid from Merck. And this BOD can't see this!
I do not see this is particularly wonderful news. Bought some shares at equivalent of around $1.40 several years ago
I was expecting around the $4 mark. Quite a few of the recent deals have been over the $1billion mark.Strangely, just 6 weeks before the acquisition offer, there had been a $30m placement @ $0.82 to a Chinese group, Lepu Holdings, which gave it 13% of the company. (Unsurprisingly, it voted in favour of the acquisition).
The only other identified institutional shareholder was the Australian fund, Quest Asset Partners.
But, unidentified, another 30% of the company was owned by a number of international funds, the majority US-based. Their holdings all sat under the 5% substantial shareholder notification level and were held in nominee accounts. These funds also accepted the acquisition offer.
View attachment 6229518View attachment 6229521Turning to Neuren, its Top 4 holders, all nominee companies - HSBC, J P Morgan, Citicorp and National Nominees - held roughly 40% equity in the company as at 22 March, 2024.
As Neuren is incorporated in New Zealand under the Companies Act 1993, it is not subject to Chapter 6, 6A, 6B and 6C of the Corporations Act, Australia, dealing with the acquisition of shares (such as substantial holdings and takeovers).
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