The Talecris Biotherapeutics acquisition by Spanish company Grifols (MCE:GRF) looks like it’s moving closer to receiving regulatory approval, at least that’s how stock traders view the deal.
Bloomberg Businessweek reports that investors have grown more bullish on Talecris (NASDAQ:TLCR), particularly since the Research Triangle Park, North Carolina company extended the deadline to close the $3.4 billion deal from March until June 30.
“There is a high level of confidence that they’re going to get approval any day,” said Peter Lobravico, New York-based vice president of merger arbitrage trading and sales at Wall Street Access told Bloomberg BusinessWeek. “I’m still taken aback as to why this has taken so long.”
But the lengthy process is also taken by some as an indication that the U.S. Federal Trade Commission and the companies have found common ground to work from. If the commission were going to block the deal, the agency could have indicated so by now.
The FTC in 2009 moved to block the proposed $3.1 billion acquisition of Talecris by Australian company CSL Limited (ASX:CSL), the No. 2 player in the blood therapeutics space. FTC concerns centered on concentration of market power in fewer players in blood therapeutics. The commission was also concerned about the impact those changes would have on drug prices. Barcelona-based Grifols had expected to close the Talecris acquisition by the end of 2010. But in midwinter, concerns rose that the FTC would again block a merger in the blood therapeutics space. Reuters in February reported that FTC staff believed the agency should also challenge the Talecris-Grifols merger.
Growing investor interest in Talecris stock is one indicator of improving confidence in forthcoming regulatory approval. Talecris stock is now trading at about $27.35 per share, just shy of its 52-week high of $27.49. Grifols has also publicly expressed confidence. Chairman and CEO Victor Grifols last week told Bloomberg News he is optimistic the deal will be approved by the FTC.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
“I have in my bag $4 billion sitting and waiting to be invested,” Grifols said at an event in Madrid. “I don’t know when we’ll receive the green light from the FTC. I’m sure we’ll get it, but it’s a very long process. As soon as we get approval we are going to invest it.”
The proposed $3.4 billion acquisition was announced by the companies last June. Grifols secured $4 billion from lenders to finance the deal. When the deadline to close the deal was pushed from March to June, Grifols said that those financial commitments were extended as well. Shares of both Talecris and Grifols have risen since the acquisition was first announced and Bloomberg calculates the value of the deal, including net debt, is now $4.5 billion.
If the FTC now stands ready to allow the deal, it’s possible that the agency has asked Talecris to sell off some of its business units as a concession. But it’s also possible that the agency is basing its position on the companies’ numbers. Baxter International (NYSE:BAX) is the revenue leader in the blood therapeutics space with $5.3 billion in annual U.S. sales. But Bloomberg notes that Grifols’ $450 million in U.S. sales combined with Talecris’ $1.1 billion in revenue is pretty close to CSL’s $1.5 billion in sales in the Americas. The two together make for one big company. But for the FTC, that combination might be just right for maintaining an acceptable level of competition.
