Shares in CSL jumped sharply yesterday on the news that the blood products and vaccines developer had ended the planned takeover of US-based plasma therapeutics firm Talecris Biotherapeutics Inc, and would now conduct a share buyback with the money it raised to fund the deal.
The news was announced to the ASX, along with the buyback.
The news came just 12 days after CSL’s board and management expressed their complete support for the US move, which had been opposed by America’s Federal Trade Commission, the lead competition regulator in the US.
The Commission then filed a number of documents in a US court alleging anti competitive behaviour by CSL and other companies in the blood supply business, as part of the background as to why it was taking court action to block the $US3.1 billion bid from the Australian company.
Some of the claims were significant, but have been untested, but helped keep the pressure on the CSL board and senior management to abandon the bid.
Many shareholders have wanted the bid dropped because of the potential delay and cost and uncertain outcome, and return cash (around $A4 a share) raised in an issue last year.
Yesterday morning CSL waved the white flag and abandoned the US move.
It now plans to buy back up to 54.9 million shares on market, or about 9% of the shares on issue.
The company said it will spend about $1.59 billion on the buyback, based on last Friday’s closing price of $28.98.
The shares jumped strongly on the news, ending $1.51 higher at $30.49, a rise of more than 5% on a day when the market rose, then fell 0.9% in afternoon trading.
"Last year, investors supported CSL with its Talecris acquisition plan by participating in the equity raising," chief executive Brian McNamee said in the statement.
"Given the company will no longer be acquiring Talecris we think it appropriate for funds to be returned to shareholders."
"The shares will be purchased on-market over 12 months beginning on June 23."
Dr McNamee said the risks and costs associated with legal action against the US Federal Trade Commission (FTC) were too great.
"We are disappointed that the FTC resolved to block the transaction," Dr McNamee said.
"CSL’s board of directors did not believe that entering into a protracted litigation process with the FTC … would be in the best interests of our stakeholders."
CSL will pay Talecris a $US75 million ($A93.54 million) break fee, while contracts between the two companies would remain in effect, including a plasma supply deal announced in association with the Talecris bid.
"CSL remains a well-positioned global biopharmaceutical business and will continue to expand on its core strengths," Dr McNamee said.
"We have consistently produced year-on-year growth for our shareholders and we are confident in the continued value and growth potential of our stand-alone business."
“We are committed to managing the company’s capital structure in the interests of our shareholders.
“The buyback will improve investment return ratios such as earnings per share and return on equity to the benefit of shareholders.
"Given the Company’s strong cash flows and balance sheet position, CSL is expected to retain a prudent level of gearing following the buyback,” Dr McNamee said in the statement on the buyback.
