23 January 2003 11:56 [Source: ICIS news]
LONDON (CNI)--UK biotechnology group Cambridge Antibody Technology (CAT) is to acquire compatriot rival Oxford GlycoSciences (OGS) in an all share deal worth £109.6m ($177.3m/Euro166.4m), the two companies announced Thursday.
The merger, which marks a major and long-anticipated consolidation of the UK biotech sector, is scheduled for completion in March 2003, subject to shareholder and regulatory approval.
Today’s announcement comes days after another UK biotech company, British Biotech, confirmed it is in merger negotiations with a number of companies including Britain's Ribotargets.
OGS shareholders will receive 0.3620 new CAT shares for each OGS share and 0.3620 new CAT ADS for each OGS share. Based on CAT’s closing share price of £5.40 on 22 January, the merger values each OGS share at £1.95, representing a 28.2% premium over OGS’ closing price of £1.52.
Upon completion of the merger, CAT shareholders will hold around 64.3% of the combined group and OGS shareholders will hold the remaining 35.7% of the issued share capital.
In a statement, OGS and CAT said: "The merger helps both companies to achieve their stated goals by creating an enlarged entity with significantly strengthened discovery and development capabilities and financial resources with which to build its pipeline."
Cost savings based on the removal of duplicated activities, research and development (R&D) and real estate are expected to have a cash effect of around £10m in the first full financial year after completion of the merger. One off costs relating to the merger are estimated to be up to £6m.
OGS and CAT also expect to make cash savings after a portfolio review, aimed at refocusing R&D expenditure on the highest quality projects. The review results are due in November 2003.
The two groups said the merger will significantly strengthen core R&D capabilities combining CAT’s human monoclonal antibody product development expertise with OGS’ onclogy drug discovery capabilities.
They added that the enlarged group should be financially strong enough to fund product development to later stages.
Pro-forma cash for the group as of 31 December 2002 was £260.1m.
The enlarged company, which will eventually change its name from CAT, will have a strong portfolio and pipeline with two approved products, seven additional products in clinical trials and seven pre-clinical products.
OGS chief executive David Ebsworth will invited to join the CAT board as an executive director to assist with the integration process. Once integration is completed he will remain on the CAT board as a non-executive director.
Denis Mulhall, OGS chief financial officer will be invited to join the CAT executive committee.
Top management at CAT is expected to remain in place following the merger, with Peter Garland as chairman, Peter Chambre as chief executive and John Aston as chief financial officer. However, two CAT non-executive directors will stand down from the board by the end of the year.
The CAT board confirmed that existing contractual employment rights, including pension rights, of both CAT and OGS employees will be fully safeguarded following completion of the merger.
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