- RTW offers 1.4633 shares for each Arix share
- RTW agrees to purchase 33mn Arix shares from Acacia Research at 143p
Arix Bioscience (ARIX:121p), a global venture capital company that holds a diversified portfolio of unlisted and listed investments in early-stage biotechnology businesses, has received a recommended all-share takeover bid from RTW Biotechnology Opportunities (RTW:89.6p and RTWG:$1.08).
RTW is a specialised life science investor with a 14-year track record and one that has delivered an annualised net return of 21.6 per cent since inception from its leading private fund. Managed by a team of 43 investment professionals, RTW adopts a science-led investment approach. The fund's net asset value (NAV) of $337mn is 19 per cent more than Arix’s NAV of $284mn. Combining the two funds will not only create a group with increased scale and a more diversified portfolio across both private and public assets, but it should improve the potential for a re-rating.
RTW has also agreed to purchase Acacia Research Corporation’s (US:ACTG) 25.5 per cent stake in Arix for 143p cash per share, a 20.5 per cent discount to Arix’s NAV of 180p on 30 September 2023. However, based on RTW’s latest share price (which fell 3 per cent following the announcement), the all-share offer is only worth 131p a share to other Arix’s shareholders, representing a 27 per cent discount to the group's latest NAV.
Moreover, Arix’s NAV of £232.4mn (180p) comprises cash of £106mn (82.1p), listed portfolio (£55.9mn, or 43.3p), unlisted portfolio (£67.6mn, or 52.3p) and other assets (£2.9mn, or 2.2p). The muted response to the offer – Arix’s shares edged up 2 per cent to 121p, a 10 per cent premium to the 110p entry point in my 2023 Bargain Shares Portfolio – is hardly surprising given that its cash and listed portfolio are worth 125.4p a share. RTW’s shares trade on a 33 per cent discount to NAV, too.
So, although I feel the combining of the two groups makes strategic sense, I would hold out for an improved offer from RTW. Hold.
■ Simon Thompson's latest book Successful Stock Picking Strategies and his previous book Stock Picking for Profit can be purchased online at www.ypdbooks.com at £16.95 each plus P&P of £4.95, or £25 plus P&P of £5.75 for both books.
