As forecast, the Merger and Acquisition trend which we have been long reporting would peak when the Federal Reserve would aggressively raise interest rates and cut off the cheap money supply. Now, according to the Financial Times, U.S. M&A activity fell 43 percent in recent months. They also note that while autumn is the time for new stock sales and corporate mergers, with interest rates going up, they “slowed to a trickle.” Here is the latest “trickle.”
AMGEN TAKES OVER HORIZON THERAPEUTICS
U.S. biotech giant Amgen has bought Horizon Therapeutics, a maker of drugs that treat rare autoimmune and inflammatory illnesses, for $28.3 billion, Amgen’s priciest purchase to date.
Amgen will pay $115 a share, a 50-percent premium to November’s stock price just before the discussions between the two firms were disclosed.
Horizon makes drugs that treat chronic gout; a compound that eases neuromyelitis optica, a disease of the central nervous system; and the popular Tepezza, which is effective against thyroid eye disease.
The deal’s hefty price signals a rebound in the sector’s M&A market after a slow year, analysts said to the Financial Times.
Valuations of biotech stocks have fallen dramatically, making several attractive takeover targets for larger firms, which have numerous patents ending this decade and are looking to replenish their supply of higher-price name-brand remedies.
“Ample corporate cash” in Big Pharma’s pockets, “the need to address medium-term [patent] pipeline gaps, and the resetting of biotech valuations will provide the backdrop for an active year,” PwC analysts wrote in a note earlier this month.
The value of the sector’s 2023 M&A deals could reach $275 billion, compared with less than $170 billion this year, PwC projected.
Analysts were skeptical about this specific purchase, however.
Amgen is borrowing $17 billion to fund the deal, adding that to the $39 billion it already owes.
“I struggle to see the upside for Amgen, given the valuation being paid,” Evercore analyst Umer Raffat told the FT.
THOMA BRAVO SPENDS $8 BILLION FOR ANOTHER TECH FIRM
U.S. private equity company Thoma Bravo has agreed to buy business software developer Coupa Software for $8 billion.
The deal is Thoma’s latest in a campaign to expand its portfolio of tech investments as share values in the sector tumble on rising interest rates and a slowing global economy.
Earlier this year, Thoma bought IT companies Anaplan and Sailpoint Technologies and cyber security specialists Forgerock and Ping Identity.
In the current deal, Thoma is paying $81 a share for Coupa, 77 percent more than the stock’s trading price before news of the sale broke.
The Abu Dhabi Investment Authority is a “significant” minority partner in the acquisition, which is partly funded by $2.6 billion in loans from 19 lenders led by Sixth Street.
HMI Capital Management valued Coupa at $95 a share last week, but Coupa defended the lower sale price, noting that its growth has slowed markedly this year and that Thoma’s price was higher than a previous bidder with which Coupa had been having a serious discussion.
Thoma now has deployed more than half of its current $24.3-billion buyout fund.
MICHIGAN MEDICINE BUYS SPARROW HEALTH
Michigan Medicine, the University of Michigan’s medical center, is paying $800 million to take over Sparrow Health System, which operates 115 walk-in and other care centers and six hospitals with 700 beds across the central part of the state.
The boards of both organizations have approved the merger.
The combined entity will have an estimated annual revenue of about $7 billion.
Michigan Medicine will invest heavily in “facility improvements” and make “substantive” capital investments, including new buildings and expansion of Sparrow’s medical technology infrastructure.
Sparrow has been struggling financially, laying off hundreds of employees in September after falling into a $90-million deficit in the first half of this year.
News of the deal has been marred by charges by the nurses’ union, the members of which had voted overwhelmingly to strike for improved working conditions, including an end to mandatory overtime.
The union’s management chose not to follow the vote and call a strike, according to the World Socialist Web Site (WSWS).
Throughout the negotiations with the union, Michigan Medicine also was working out details of the Sparrow takeover. It also was drafting plans for a new, $1-billion hospital adjacent to its medical center.
Union activists have alleged that the union’s management colluded with the medical centers’ administrators to squelch the strike in order to preserve the center’s finances for the Sparrow purchase and the new hospital rather than meet the union’s demands, which would have involved spending more money on staff.
“Michigan Medicine is merging with Sparrow, but they say there is ‘no money’ for raises,” one worker told the WSWS.
The merger of the two health giants is likely to form the largest healthcare network in the state, according to the WSWS.