Celltech plans Oxford Glyco bid to break up Â£110m CAT merger
Monday 17 February 2003
Cambridge Antibody Technology, the UK biotechnology company, yesterday said it was pressing ahead with plans to merge with its smaller rival, Oxford GlycoSciences, despite news that Celltech, Britain's biggest biotech group was preparing a rival bid for the Oxford-based company.
CAT, which announced plans for an agreed takeover of OGS last month, said it had received "positive feedback" from the company's shareholders for its proposed £110m all-share offer.
The move came after Celltech emerged as another likely buyer of OGS. Celltech is thought to be close to launching an all-cash offer pitched slightly higher than CAT's all-share bid. The bid could wreck the merger plans of the two smaller companies.
Celltech refused to comment on its plans, but it is believed to have asked its advisers, Cazenove and JP Morgan, to carry out a careful assessment of OGS's business.
Celltech is likely to table its own bid within the next few weeks, before OGS's shareholders vote on the CAT deal at an extraordinary general meeting on 11 March.
If Celltech prevails in the bidding battle, the enlarged company is likely to be run by Goran Ando. Mr Ando, currently the research and development director at Pharmacia, is widely tipped to become Celltech's new chief executive when Peter Fellner moves up to become non-executive chairman next month.
OGS said last month its two largest shareholders, Invesco and Fidelity, which hold a combined 29 per cent, supported CAT's offer. Yesterday it said that deal remained the only one on the table, making it "in the best interest of our shareholders" to press ahead.
The two companies argued when they unveiled their deal on 23 January that their drug discovery technologies would fit well together.
OGS is an expert in proteomics, and as such is able to identify proteins in the human body which may be linked to disease. CAT's expertise is in the identification and manufacture of antibodies, which are formed in the human body to fight disease.
The enlarged group would have seven products in trials on humans and another seven in pre-clinical development.
Both companies would also bring one finished product to the merger. CAT's Humira is a treatment for rheumatoid arthritis which is ready for launch in the US, and OGS's Zavesca treats Gaucher disease, a rare condition in which the body has difficulty breaking down fat.
CAT's offer was well received in the City for its strategic fit but not seen as a generous valuation of OGS, which has a market capitalisation of only £95m but a cash pile of £130m.
The CAT offer values OGS at a 30 per cent discount to its cash pile. Critics have said the deal is also, in effect, a rights issue for CAT, which will have to issue shares in order to complete the purchase.
Celltech, which is also developing an arthritis drug, is set to make £51m of profits this year. Financially, it could outgun CAT and also believes OGS's shareholders will favour the fact that it is offering cash.
OGS' shares have advanced 28 per cent this year, and closed at 172p on Friday.
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