RHS to be acquired by US giant PerkinElmer amidst growing M&A momentum in biotech

RHS ASX PerkinElmer merger acquisition biotech
PerkinElmer is a large US-based multinational company worth around $8.5 billion.

Biotech sector merger and acquisition spending continues to grow, as RHS Limited (ASX: RHS) became the latest ASX-listed biotech company to announce its likely takeover by a US peer.

On this occasion, PerkinElmer (NYSE: PKI), a large US-based multinational company worth around $8.5 billion by market capitalisation.

Just last week, Merck and Viralytics announced a proposed deal that will see the US giant acquire the entire company for around A$502 million — a 160% premium to its market value.

Earlier today, RHS announced a comprehensive takeover offer from PerkinElmer at 28c per share, a 100% premium to its last closing price, thereby valuing the bid at around $25 million.

The is just the latest in a series of mergers and acquisitions (M&A) that have occurred across the biotech sector in recent months. The frenzied biotech activity has seen US biotech developers spend almost US$30 billion M&A transactions just in January alone.

RHS saw its shares trading at $0.27 in early morning trade on the ASX with RHS’ Board saying that it “unanimously recommends that all RHS shareholders vote in favour of the Scheme, subject to an independent expert report concluding that the transaction is in the best interests of all shareholders and no superior proposal being received,” in a shareholder market update.

PerkinElmer has agreed to pay $0.28 per share in an all-cash deal for the entirety of RHS with the deal now going to a vote before RHS shareholders at a general meeting on 22 May 2018.

If accepted by shareholders, the takeover deal should be formally completed in early June 2018.

Takeover commentary

According to senior RHS figures, the proposed deal offers an attractive premium and is a preferable development path as opposed to pursuing a stand-alone growth strategy.

“The offer provides certainty of RHS’ shareholder value and immediately matures the Company’s share price without further investor risk inherent in pursuing a stand-alone commercial growth strategy,” according to an official statement from RHS.

“The PKI proposal was welcomed by the Board as an opportune time to reward shareholder loyalty and to progress RHS’ capabilities and technologies at an important commercial inflection point. PKI has recognised the future potential of RHS’ products and know-how, and our CEO Michelle Fraser and her team are to be congratulated for creating increased shareholder value. This has been achieved under financial constraints following the repositioning of the Company some time ago, in response to market trends in the fast evolving world of genomics,” said Dr David Brookes, Chairman of RHS.

RHS CEO, Dr Michelle Fraser added that “the offer from PKI reinforces the considerable expertise that the RHS team have integrated into each of our products. Bringing RHS and PKI together provides an opportunity for our products to reach the clinical and applied research markets through a large and highly experienced global team. The achievement of a binding agreement from PKI follows a due diligence period, including an assessment of technical performance of our products and their commercial value.”

With RHS shares trading around 96% higher this morning, Dr Fraser said that “reaching the premium over our current share price is evidence of the value of RHS in the hugely competitive single cell genomics market.”

Bridge funding

In order to complete the proposed acquisition at the most beneficial value to shareholders, RHS has entered into a funding agreement with The Very Company, an entity belonging to RHS Alternative Director Colin Matthews.

According to RHS, bridge funding from The Very Company allows RHS to avoid raising more capital and diluting shareholder value prior to PerkinElmer completing the acquisition.

The funding facility carries an interest rate of 9%, a limit of $750,000 and a repayment date of 28 September 2018, with RHS asserting that “the interim funding arrangements are no less favourable to RHS than arm’s length terms,” and thereby do not carry any conflicts of interest, pressure, or duress from any party involved in the transaction.

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