(Bloomberg) — Swedish Orphan Biovitrum AB agreed to buy US biotech CTI BioPharma Corp., which develops therapies for blood-related cancers, in a deal valued at $1.7 billion.
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Sobi shares plunged as much as 17% in early trading after the company said it would acquire all of CTI’s outstanding stock for $9.10 per share, almost double CTI’s last closing price, and issue new shares to fund as much as half of the transaction.
The deal “fits well” with Sobi’s focus on hematology, analysts said, and delivers a medicine that’s already cleared for sale in the lucrative US market, called Vonjo. But “the equity component of the transaction may initially be perceived negatively” because the new share issuance will dilute the stock, RBC Capital Markets analyst Alistair Campbell said in a note to clients.
The takeover will initially be funded 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 an issuance of new ordinary shares, Sobi said.
The transaction price represents a multiple of about 1.9 times peak sales, compared with as much as 3 times for recent deals, “which makes the valuation look reasonable,” Handelsbanken analyst Mattias Haggblom said in a note.
CTI was expected to become profitable next year and “there are certainly going to be synergies for Sobi to extract to accelerate that profitability,” he wrote.
Sobi’s main shareholder Investor AB — controlled by the Wallenberg family — agreed to subscribe for its pro-rata share of the rights issue, corresponding to about 34.7% of the shares to be issued.
Read More: Sobi to Buy CTI BioPharma for $9.10/Share in Cash: M&A Snapshot
CTI’s board backed the transaction. The deal is expected to close in the third quarter.
–With assistance from Jonas Cho Walsgard and Jonas Ekblom.
(Updates with shares from second paragraph)
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