GSK in line to snap up Serono for $12bn after auction collapse

UK giant now preferred bidder

GlaxoSmithKline has emerged as the favourite to buy Swiss biotech firm Serono for a knockdown $12bn (£7bn) after an attempt to auction the business collapsed.

Serono's chief executive, Ernesto Bertarelli, put the group up for sale by asking for bids for the 62 per cent stake owned by his family. A valuation of $15bn was put on the company, which makes a multiple sclerosis drug, Rebif, and infertility treatments.

An auction attracted interest from GSK, Novartis of Switzerland and America's Pfizer, among others. But by the closing date for bids a week ago, none had put in a firm offer.

However, it has emerged that the sale process is not dead, with talks still going on. GSK is understood to be the preferred bidder, though a spokesman for the UK-based giant declined to comment.

Daniel Vasella, chief executive of Novartis, which was seen as an early favourite to buy Serono, signalled last week that it would be cautious about acquisitions, saying that vendors were inflating prices. It recently walked away from a deal to buy the Swiss drugs group Berna Biotech.

Serono's shares have fallen back from a high of Sfr1098 (£484) to Sfr973 on Friday. At that price, the group is valued at around $11.5bn.

GSK is keen to bolster its drug pipeline and believes it can increase Serono's annual sales of $2.5bn by more effective marketing. Even so, GSK shareholders may consider Serono an expensive purchase at more than 20 times earnings.

Mr Bertarelli is best known for bankrolling the famous Swiss victory in the America's Cup yacht race in 2003. This gave the landlocked country the right to decide where the competition should be staged in 2007, and it has decided that it should be held at Valencia in Spain.

It will be the first time in 156 years that the America's Cup has taken place in Europe.