(Bloomberg) — Sweden’s Orphan Biovitrum AB has agreed to buy US biotech CTI BioPharma Corp. , which is developing treatments for blood-related cancers, in a deal worth $1.7 billion.
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Shares of Sobi fell as much as 17% in early trading after the company said it would acquire all of CTI’s outstanding shares for $9.10 a share, nearly double CTI’s last closing price, and issue new shares to fund up to half of the deal.
Analysts said the deal “fits well” with Soby’s focus on blood diseases, and brings a drug already approved for sale in the lucrative US market, called Fungo. But RBC Capital Markets analyst Alistair Campbell said in a note to clients: “The equity component of the transaction may be viewed negatively at first” because the new share issue would dilute the stock.
The acquisition will be funded initially with debt financing from Bank of America Corp. and Danske Bank A/S. After the deal closes, up to half of the purchase consideration will be refinanced through the issuance of new common shares, Sobie said.
The deal price is a multiple of around 1.9 times peak sales, compared with up to 3 times for recent deals, “which makes the valuation seem reasonable,” Matthias Haegeblom, an analyst at Handelsbanken, said in a note.
CTI was expected to become profitable next year, writing “there will certainly be synergies for Sobi to extract to accelerate that profitability.”
Investor AB – the major shareholder of SOBI – which is controlled by the Wallenberg family – has agreed to subscribe to its pro rata share in the rights issue, which is equivalent to approximately 34.7% of the shares to be issued.
Read more: Sobey buys CTI BioPharma for $9.10/share in cash: M&A Snapshot
CTI’s board of directors backed the deal. The deal is expected to close in the third quarter.
— with assistance from Jonas Cho Walsgard and Jonas Ekblom.
(Updates with posts from the second paragraph)
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