Lilly’s $70 per share bid has received the approval of chairman Carl Icahn, who owns about 14% of the company.
Eli Lilly has been revealed as ImClone Systems’ mystery suitor. After conducting due diligence, Lilly and ImClone have entered a $6.5 billion merger agreement, which calls for $70 per share.
Lilly’s offer dwarfs Bristol-Myers Squibb’s last unsolicited proposal of $62 per share made on September 22. At that price, Bristol-Myers Squibb would have paid $4.7 billion for the 83.4% it doesn’t already own. Lilly’s offer also represents a 51% premium over ImClone’s closing price on July 31, the day before Bristol-Myers Squibb made the first move to the bidding plate.
Bristol-Myers Squibb initially came in with a $60 per share proposal. In the months that followed, ImClone stated that it had another bidder, who was willing to pay $70 per share. Bristol-Myers Squibb did hike up its price to $62 per share, but this too was rejected by ImClone. Tracy Furey, a Bristol-Myers Squibb spokesperson, had no comment on the situation.
The transaction with Lilly has already received the approval of ImClone chairman, Carl Icahn, who holds approximately 14% of the firm’s outstanding stock. Icahn, who is known for his activist style of investing, has raised his voice against the Bristol-Myers Squibb acquisition right from day one.
In fact, he calls the deal with Lilly a vindication of the board’s decision in 2006 to reject an $36 per share offer. At the time, Icahn took over ImClone’s old board through a proxy contest and consent solicitation in which he criticized the old regime.
Lilly expects the transaction to close in the fourth quarter of 2008 or the first quarter of 2009. The company says that it is not subject to financing. The deal should be accretive to earnings on a cash basis in 2012 and on a GAAP basis in 2013, according to the company. Lilly will be able to add Erbitux to its portfolio of drugs. In 2007, worldwide sales of Erbitux grew 18% to approximately $1.3 billion.
Lilly reports that the main reason behind its intent to acquire ImClone is the company’s pipeline. It has a number of drugs in mid- to late-stage development that will add to Lilly’s 13 clinical candidates. Up to three compounds in ImClone’s pipeline could enter Phase III trials in 2009, according to Lilly.
ImClone also has a significant focus on biologics, which Lilly is trying to boost. Lilly’s existing biotech capabilities will be complemented and enhanced by ImClone’s expertise in the scale-up and manufacturing of biologics. In addition, Lilly gains ImClone’s development and commercial center.
