Hungary’s Egis Pharmaceuticals PLC (Egis) has announced on Tuesday that it has received today a voluntary public purchase offer from Arts et Techniques du Progrès, a wholly owned subsidiary of Servier Group to acquire all of the outstanding shares of Egis stock not owned by the Offeror at a price of HUF 28,000 per share in cash. Currently, the Offeror owns approximately 51% of the shares of Egis. The offer is 33% higher than the current share price of Egis on the Budapest Stock Exchange (BSE).
Trading in Egis shares has been suspended for today, but it may restored should the CEO of the Budapest Stock Exchange (BSE) decides so. Chances are high that the Offer will be successful, but we need to highlight that valuation levels are not elevated at all therefore it is also possible that institutional investors will drive the price higher at the end of the day. Servier will hold an online press conference about the offer at 15:00 CET today.
A meeting of the Board of Directors of Egis will be convened to discuss and vote on the opinion concerning the Offer.
Egis underlined that the Offer has been submitted to the Hungarian Financial Supervisory Authority but it has not been approved yet.
Servier is the biggest shareholder of Egis with a holding of nearly 51%.
Arts et Techniques du Progrès, a wholly owned subsidiary of Servier Group, owns directly 3,963,922 pieces of shares in Egis, each with a nominal value of HUF 1,000 and representing altogether 50.91% of the registered share capital of the Company and 50.91% of the votes at the Company’s general meeting. It has no indirect ownership in Egis.
About Servier
Servier is a privately-held research-led pharmaceutical group, with more than 22,000 employees, including 3,000 in R&D, around the world and is present in more than 140 countries. Organized as a foundation and deeply committed to research, it reinvests a large portion of its sales in the research and development of innovative medications.
Trading in Egis shares has been suspended earlier today for the whole of 24 September, but the CEO of the BSE may resolve to resume trading in the company's ordinary shares prior to the end of the suspension period.
The Closing Day of the Offer is the first Tuesday after the elapse of 30 calendar days following and including the Commencement Day (the day between the second and fifth day following and not including the day of the publication of the final Offer approved by the HFSA, on which the Acceptance Period starts.)
The Offeror has declared that “subject to the fulfilment of necessary conditions provided for by the Capital Markets Act, the Offeror intends to squeeze out the minority shareholders whose Shares have not been acquired in the frame of the Offer which will result in an automatic de-listing from the Budapest Stock Exchange."
“Irrespective of the actual result of the Offer, the Offeror may decide to propose to the general meeting of the Company to delist the Company’s shares from the Budapest Stock Exchange after the completion of the Offer," it added in the enclosed voluntary purchase offer.
Although the offer is indeed unexpected, we are not really surprised. In the editorial we have been engaged in serious discussions about this subject over the past weeks and months and these always led to the same question: Why would Servier want to buy up Egis exactly now when we had seen similarly low valuation levels several times before? The answer could be that the biotech story is now within reach, but also that cheap funding is coming to an end worldwide. Therefore if Servier was to finance the deal from credit it could do so at extremely low valuation and at still low interest rates.
Although we do not believe the takeover premium is so high compared to Monday’s closing price that the offer will most likely be successful, it is also possible, in our view, that institutional investors will squeeze out an even higher price. Even at HUF 28,000 neither the PE-based, nor EV/EBITDA-based valuation can be regarded as outstandingly high. It is especially true if we take into consideration the company’s cash and cash equivalents that correspond to 37% of the share price.
We have seen higher valuation figures than the one calculated with the offered price even during the crisis therefore we cannot exclude the possibility that several institutional investors will not offer their packages for sale and at the end of the day delisting could take place at an even higher price.
Servier said in a separate press release that it “has been, and will continue to be, primarily an innovation-led pharmaceutical group, but also controls three generic pharmaceutical affiliates, including Egis, operating in separate markets and each with its own separate management, identity and business strategy."
“As a consequence of this Offer, Servier Group does not intend to make any significant changes to the strategy or operations of Egis, which is already well-integrated into Servier Group’s operational structure and will continue to operate under its own highly respected identity," it added.
“We remain committed to our strategy of focusing on continued innovative pharmaceutical research and development," said Dr Jacques Servier, President and Founder of Servier Group.
“Egis is the only listed company within Servier Group, but has no need to use the equity capital market for financing, therefore we believe being listed on the Budapest Stock Exchange makes little financial sense for Egis. Our two companies have an 18-year shared history and we know and value highly Egis’ management team and its strategy."
Servier said the Offer represents a “compelling opportunity" for minority shareholders to realise a substantial return on their investment, offering a premium of 33% to the last available trading price and delivering total shareholder returns over the last twelve months of 60%, compared to the BUX index return of -3% over the same period.
“For Servier Group the price of HUF 28,000 is final and will not be revised, regardless of the outcome of the Offer. Following the conclusion of the Offer, Servier Group will consider requesting a general meeting of Egis to decide on the delisting of Egis from the Budapest Stock Exchange."
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