Pharma group BTG (BTG) is finally back on track, sealed with a solid set of half year numbers last week. But just seven days on from the interim release, the group has revealed a £3.3bn takeover offer from Bravo Bidco, a newly incorporated entity, wholly owned by New-York-listed medical solutions group Boston Scientific (US:BSX). The 840p-a-share offer represents a premium of 36.6 per cent to the closing price on 19 November and a 51 per cent premium to the 90-day moving average. The board will unanimously recommend the offer at a general meeting, and a full timetable of the scheme will be circulated to shareholders in due course, but bosses have already received irrevocable undertakings from BTG shareholders who hold roughly a third of the share capital in aggregate.
Broker Shore Capital said the offer was "attractive" and urged investors to accept the deal. Not only is the premium generous, in its view, but the offer is all cash, providing "an immediate amount at a certain value". Furthermore, BTG is forecast to achieve a net income of approximately $180m (£140m) in FY2019 and a four-year average net income of $200m by FY2020. As such, the £3.3bn offer price implies Boston’s return of capital to be approximately 5 per cent. Assuming a cost of capital of between 8 and 10 per cent, in the absence of cost synergies, Shore Capital says this represents good value for BTG shareholders.
However, as part of the takeover, Boston will win access to BTG’s portfolio of interventional oncology drugs, significantly expanding its own capabilities in this field. As for the pharmaceutical division, which remains highly cash generative, Boston may choose to offload it. Either way, broker Numis says it does not believe the 840p offer adequately values either the interventional medicine division or the $660m-worth of research and development (R&D) undertaken over the past six years. Analysts there also believe there’s scope for competing bids, picking £11 per share as a "justifiable target". That said, a coup would have to start at a minimum of 925p, given the level of irrevocable undertakings.
