Marconi's Mayo makes return with Xenova deal

Xenova, the Cambridge-based biotechnology group, has agreed to be taken over by Celtic Pharma in a deal worth up to £26.1m.

Xenova, the Cambridge-based biotechnology group, has agreed to be taken over by Celtic Pharma in a deal worth up to £26.1m.

Celtic Pharma, a newly formed private equity group owned by Stephen Evans-Freke and John Mayo, the former finance director of Marconi, is looking to build a portfolio of drugs in late-stage clinical development. The deal marks Mr Mayo's first major acquisition since being ousted from the telecoms group four years ago.

Celtic saidit intends to acquire between 12 and 15 similar programmes by the middle of next year to bring the market a "diversified portfolio" of experimental drugs.

In the recommended proposal, Celtic Pharma will offer shareholders a choice of three deals: a secured loan note offer, a cash and secured loan offer and an alternative cash offer.

Xenova's directors, advised by Lazard, the investment bank, said they believed the cash alternative to be "fair and reasonable". Shares in the biotech shot up 16 per cent to 4.5p yesterday before sliding to 4.25p.

As part of the proposal, a member of Celtic Pharma, Celtic X Licensee, has agreed a worldwide licence with Xenova for developing its nicotine and cocaine vaccines, as well as providing a secured loan of up to $20m (£11m), regardless of whether the takeover succeeds.

The dealis now at the mercy of shareholders, who have been urged by Xenova's directors to vote in favour of the resolutions. Speaking on behalf of the directors, David Oxlade, the chief executive, said: "We believe this offer is in the best interests of our shareholders." He addedthat Xenova's portfolio of clinical programmes "will require significant funding ... which Celtic Pharma is in a position to provide".

After many high-profile mergers it is hoped that the deal with Celtic Pharma will help Xenova launch its first drug on to the market.

Xenova's shareholders, half of whom are based in Europe, include Isis and Legal & General. The biotech's largest individual shareholder is Kim Tan, who held a large stake in Cares BioMedic, a company bought by Xenova.

In recent months, Xenova has been hit byinvestors' reluctance to plough money into the industry because of low success rates with experimental drugs.