Japanese drug maker Eisai Co. said Monday it will buy U.S. biopharmaceutical company MGI Pharma Inc. for $3.9 billion in cash in a move aimed at boosting its cancer drug business and sustaining sales growth.
Eisai will buy all outstanding MGI shares for $41 each, the companies said in a statement. The per-share price represents a 23 percent premium to MGI's closing price Friday of $33.45 and a 38.7 percent premium to MGI's closing share price of $29.55 on Nov. 28, the last business day before the company announced it would explore strategic alternatives.
MGI Pharma's board unanimously approved the deal, which Eisai expects to conclude in the first quarter of 2008. If the transaction is terminated, MGI Pharma may be required to pay a $120 million termination fee to Eisai.
"Eisai has enormous respect for MGI Pharma's products, pipeline and people," Eisai President and CEO Haruo Naito said in a statement. "We expect this transaction to allow Eisai to significantly strengthen its oncology business and increase the likelihood of achieving our current strategic plan targets and our future revenue and earnings growth."
MGI Pharma makes Aloxi, an injection for cancer patients to help prevent post-chemotherapy nausea and vomiting. It also sells injectable Dacogen for the treatment of bone marrow disease myelodysplastic syndrome, the Gliadel Wafer for brain cancer, and Hexalen, a second-line chemo treatment for ovarian cancer.
The company reported 2006 sales of $342.8 million.
The Bloomington, Minnesota-based drug maker spoke with "many of the leading companies in the pharmaceutical and biotechnology industry" before agreeing to the Eisai buyout, MGI Chief Executive Lonnie Moulder said in a statement.
Faced with the expiration of its U.S. patent on best-selling Aricept Alzheimer's disease treatment in 2010, Eisai has been keen to expand its product lineup and research in cancer treatment.
Eisai's purchase of MGI marks third major acquisition in the oncology area in recent years. Eisai bought Morphotek Inc. of the U.S. in April and four cancer drugs from Ligand Pharmaceuticals Inc. last year.
Cash-rich drug makers have been on the hunt for acquisitions, particularly companies with strong antibody and biopharmaceutical technologies, as they try to cushion the impact of expiring patents in the coming years and fill out thin late-stage pipelines. Other deals this year include Celgene Corp.'s $2.9 billion bid for Pharmion last month and AstraZeneca PLC's $15.6 billion purchase of MedImmune this summer.
The deal was announced after the close of trade on the Tokyo Stock Exchange, where Eisai shares rose 2.1 percent to finish Monday at 4,840 yen ($43.35). Eisai said it will fund the acquisition through existing cash and bank loan financing, and has secured commitments for the debt required to close the deal.
The Japanese company expects the acquisition to add to cash earnings per share in fiscal 2008 and earnings per share in fiscal 2009.
JPMorgan acted as exclusive financial adviser to Eisai, and Sullivan & Cromwell LLP is acting as legal counsel. Lehman Brothers Inc. acted as exclusive financial adviser to MGI and Hogan & Hartson LLP is acting as legal counsel.