If you can't beat them, join them
Late last Friday, just as the second-quarter’s clock ticked toward a close, Bristol-Myers snuck in the one of the larger announced deals of the period - a $5.3 billion purchase of diabetes drug maker Amylin. Under the terms of the deal, Bristol-Myers will pay $31 per share for Amylin, a premium of 10% to the company's closing price on Friday. Including Amylin's debt and a contractual payment obligation to Eli Lilly (LLY), the total value of the transaction is $7 billion.
The deal gives Bristol-Myers a robust pipeline of type-2 diabetes drugs, including Amylin's novel GLP-1 franchise that houses Byetta and Bydureon. Bristol-Myers will finance the purchase from its existing cash resources and credit facilities. Also, Bristol-Myers said it has inked a deal with AstraZeneca (AZN) to collaborate on developing Amylin's products once the buyout is completed, expanding upon an existing partnership between the two pharmaceutical makers in diabetes treatments. Under the terms of that deal, AstraZeneca will make a $3.4 billion cash payment to Amylin, which will be a wholly-owned subsidiary of Bristol-Myers.
If AstraZeneca chooses to pay another $135 million, it will be able to establish equal governance rights over key strategic and financial decisions over Amylin, Bristol said in a statement. The transactions are expected to be dilutive to Bristol-Myers' adjusted earnings in 2012 and 2013 by about $0.03 per share, and become slightly accretive in 2014.
Bristol Myers Squibb (BMY : NYSE : US$36.05), Net Change: 0.10, % Change: 0.28%, Volume: 15,621,072 Amylin Pharma. (AMLN : NASDAQ : US$30.71), Net Change: 2.51, % Change: 8.88%, Volume: 98,420,182