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Mergers and Acquisitions

Date: 2014-05-08

Type of information: Company acquisition

Acquired company: Chelsea Therapeutics (USA)

Acquiring company: Lundbeck (Denmark)

Amount: $ 658 million (approximately DKK 3.54 billion - €470.5 million)

Terms:

* On June 23, 2014, Lundbeck announced the completion of the tender offer by its wholly owned indirect subsidiary, Charlie Acquisition Corp., to purchase all of the outstanding shares of Chelsea Therapeutics International, common stock for USD 6.44 per share in cash and non-transferable contingent value rights (CVRs) that may pay up to an additional USD 1.50 per share upon achievement of certain sales milestones, in each case without interest and subject to any required withholding of taxes. The tender offer expired at 12:00 midnight, New York City time, on 20 June 2014, and was not extended. Computershare Trust Company, N.A., the depositary for the tender offer, has advised that as of the expiration of the tender offer, 49,436,852 shares of Chelsea common stock had been validly tendered and not validly withdrawn pursuant to the tender offer, representing approximately 62.5% of the outstanding shares of Chelsea common stock. In addition, Notices of Guaranteed Delivery were delivered for 12,775,214 shares of Chelsea common stock, representing approximately 16.1% of the outstanding shares of Chelsea common stock. Lundbeck expects to complete the acquisition of Chelsea during the day of 23 June 2014 through a merger under Section 251(h) of the General Corporation Law of the State of Delaware. Subject to perfected appraisal rights, all remaining shares of Chelsea common stock not tendered into the tender offer and not owned by Lundbeck, Charlie Acquisition Corp. or Chelsea (or by any direct or indirect wholly-owned subsidiary of Lundbeck, Charlie Acquisition Corp. or Chelsea) will be cancelled in the merger and converted into the right to receive USD 6.44 per share in cash and CVRs that may pay up to an additional USD 1.50 per share upon achievement of certain sales milestones, in each case without interest and subject to any required withholding of taxes, which is the same consideration that was paid in the tender offer. Following completion of the merger, shares of Chelsea common stock will no longer be listed on the NASDAQ Capital Market.

* On June 6, 2014, Chelsea Therapeutics announced the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act"). As announced on May 23, 2014 , Lundbeck has commenced a tender offer to purchase all of the outstanding shares of Chelsea for $6.44 per share in cash and one contingent value right that may pay up to an additional $1.50 per share upon achievement of certain net sales milestones, for a total potential consideration of up to $7.94 per share, or an aggregate of $658 million on a fully diluted basis.

* On May 23, 2014, Lundbeck announced that it has commenced a tender offer to purchase all outstanding shares of Chelsea Therapeutics for $ 6.44 per share in cash and CVRs that may pay up to an additional $ 1.50 per share upon achievement of certain sales milestones. The tender offer is being made by Charlie Acquisition Corp, a wholly-owned indirect subsidiary of Lundbeck, pursuant to the previously announced merger agreement between the companies. The tender offer period will expire at 12:00 midnight (New York City time) on 20 June 2014, unless otherwise extended. If closed, this acquisition of Chelsea will impact Lundbeck’s financial guidance for 2014 as also previously announced on 8 May 2014. While the transaction is not expected to have a material positive impact on revenue in 2014, it is expected to be dilutive to both cash flow and EBIT for the year, and cash flow accretive in 2015. The expected impact on Lundbeck’s profitability in 2014 will depend on the timing of the closing of the transaction. However, on a pro forma basis assuming the transaction is closed on 1 July 2014, Lundbeck expects to incur costs of approximately DKK 500 million in incremental costs related to the acquisition of Chelsea. Approximately half of the costs are related to amortization expenses.

* On May 8, 2014, Lundbeck and Chelsea Therapeutics announced that the companies have entered into a definitive agreement under which Lundbeck will acquire Chelsea. Under the terms of the agreement, Lundbeck will commence a tender offer for all outstanding shares of Chelsea, whereby Chelsea stockholders will be offered an upfront payment and contingent value rights (CVRs), representing a total potential consideration of up to $ 7.94 per share, or $ 658 million (approximately DKK 3.54 billion) on a fully diluted basis. The total potential consideration represents an attractive premium of 59% over the closing price of Chelsea shares on 7 May 2014. Consideration includes USD 6.44 per share in cash, or approximately $ 530 million (approximately DKK 2.8 billion) on a fully diluted basis, as well as CVRs that may pay up to a total of an additional USD 1.50 upon achievement of certain commercial milestones related to NORTHERA's commercial performance in the period 2015-2017. The proposed upfront per-share price represents a premium of approximately 29% over Chelsea's closing price of $5.00 on 7 May 2014. The terms of the CVR payments reflect the parties' agreement over the sharing of potential economic upside benefits from certain future net sales of NORTHERA as described in the CVR agreement and do not necessarily reflect anticipated sales of the product. There can be no assurance such levels of net sales will occur or that any or all of the contingent payments will be made. Lundbeck intends to acquire any shares of Chelsea not tendered into the tender offer through a merger for the same per share consideration as will be payable in the tender offer. The merger will be effected as soon as possible after the closing of the tender offer.

The transaction is expected to be financed by Lundbeck's existing cash reserves. The board of directors of Chelsea has unanimously approved the transaction. The transaction is expected to close in the third quarter of 2014, subject to the tender of a majority of Chelsea's outstanding shares in the tender offer, and the receipt of customary regulatory approvals, including a Hart-Scott-Rodino review in the U.S. Moelis & Company acted as financial advisor and Cravath, Swaine & Moore LLP provided legal advice to Lundbeck. Deutsche Bank Securities Inc. and Torreya Capital acted as financial advisors, and Morgan, Lewis & Bockius LLP provided legal advice to Chelsea.
If closed, this acquisition of Chelsea will impact Lundbeck's financial guidance for 2014.
While the transaction is not expected to have a material positive impact on revenue in 2014, it is expected to be dilutive to both cash flow and EBIT for the year, and cash flow accretive in 2015. The expected impact on Lundbeck's profitability in 2014 will depend on the timing of the closing of the transaction. However, on a pro forma basis assuming the transaction is closed on 1 July 2014, Lun

Details:

By acquiring Chelsea Therapeutics, Lundbeck gains the rights to Chelsea Therapeutics' recently FDA-approved product, Northera™ (droxidopa), which is expected to be launched later in 2014. The transaction will allow Lundbeck to leverage its expertise in rare neurologic disorders in the U.S. through the upcoming launch of Northera™, which was approved by the FDA on 18 February 2014 for the treatment of symptomatic neurogenic orthostatic hypotension (NOH). Northera™ is the first and only therapy approved by the FDA that demonstrates symptomatic benefit in adult patients with NOH caused by primary autonomic failure (Parkinson's disease, multiple system atrophy and pure autonomic failure), dopamine beta hydroxylase deficiency and non-diabetic autonomic neuropathy. The drug  is expected to achieve annual revenues at peak of more than DKK 2 billion in the U.S. by 2020. Northera™ will strengthen Lundbeck's existing neurology franchise in the U.S., which currently includes Onfi, Sabril and Xenazine, and ahead of potential future products like desmoteplase and Lu AE58054 currently in clinical phase III.

Related:

CNS diseases

Is general: Yes