No cash for the moment anyway from CSL, it’s going to take legal actions to try and win its $US3.1 billion acquisition of US-based plasma therapeutics firm Talecris Biotherapeutics Inc.
CSL told the ASX yesterday in a statement that it had been informed that the US Federal Trade Commission (FTC) would file a complaint in the US Federal District Court to challenge the acquisition.
CSL had warned of this possibility earlier in the week. So the chance of a cash distribution of up to $4 a share will have to wait.
CSL wants to push its proposed bid to the extremes to see if it can get it over the line.
Analysts at UBS said earlier in the week that the company has around $4 a share cash to help finance the proposed bid.
The FTC said in its statement issued earlier on Thursday that the proposed deal would "substantially reduce competition in the US markets for four plasma-derivative protein therapies".
“Now more than ever, it is critical that consumers benefit from vigorous competition in the health care sector – both to ensure competitive prices and to drive further innovation,” said Richard Feinstein, Director of the FTC’s Bureau of Competition.
“Substantial consolidation has already occurred in the plasma protein industry, and these highly concentrated markets are already exhibiting troubling signs of coordinated behavior.
"The proposed acquisition would further consolidate the industry and increase the likelihood of collusion.”
The decision is in keeping with comments from senior members of the Obama Administration that the old style of competition regulation, seen under the Bush Presidency, were gone and there would be a more activist approach aimed at consumer protection and promoting competition.
CSL said it was "surprised and disappointed by this decision, and we certainly intend to contest the US FTC’s decision" according to statements from the company and from CEO Dr Brian McNamee.
Dr. McNamee said in the statement “We strongly disagree with the FTC’s decision to challenge the deal. CSL intends to vigorously oppose the FTC’s actions.
"The FTC has failed to recognize that this combination is pro-competitive, provides significant efficiencies that will improve the supply of biotherapies, and is beneficial to the patient community.
The Commission failed to take into account the substantial remedies that were offered by CSL which addressed their concerns especially in relation to plasma supply, Alpha-1 and RhoD.”
Dr McNamee went on to say, “I’m particularly surprised and disappointed with the Commission’s theory that there is any coordination in the Plasma industry. This sector is intensely competitive with manufacturers rapidly expanding.”
“A combined company will have the ability to more quickly and efficiently meet the expected continuing demand for plasma therapies that are critical to patients suffering from bleeding disorders, immune deficiencies, CIDP, genetic emphysema, and other rare diseases.”
“The merger would result in an improved ability for CSL to supply therapies to patients and customers through expanded and integrated manufacturing with greater efficiency and fewer bottlenecks.
"An integrated R&D platform would also result in innovative products reaching the marketplace sooner.”
“These significant benefits have been understood by a number of patient groups and customers who have expressed their support for this transaction.”
Dr McNamee said the commission failed to take into account "substantial" remedies offered by CSL to address their concerns.
Dr McNamee said that CSL had offered to divest 20 to 25 plasma collection centres in the US out of a combined number of about 150, as well as some blood products in a bid to address the FTC’s concerns.
"We believe this remains a highly competitive industry, and we believe that when the facts are put in front of a judge, we will be able to present the strong efficiency case and the competitive nature of the sector."
CSL said the FTC complaint would be filed before the FTC’s administrative law tribunal.
Concurrently with that complaint, the FTC would file a motion for a preliminary injunction to legally block the transaction from closing, pending a determination by the FTC’s administrative law judge.
The legal action could take up to five months.
Dr McNamee said now was not the time to discuss what CSL would do in the way of alternatives should the company fail to get what it wants.
CSL announced the proposed Talecris acquisition in August 2008. Analysts had reported in early may that there was a growing chance the FTC might reject the bid.
CSL shares fell $1.12 to $29.03 yesterday.
Investors focused on the US situation and not the swine flu story where CSL will get contracts to produce vaccines once it’s developed. That has been swamped by the FTC move.
Under the terms of CSL’s offer it could have to $US75 million to Research Triangle Park, North Carolina- based Talecris’s owners, Cerberus Partners LP and Ampersand Ventures, if the deal isn’t completed.
Further details in the FTC statement on its US website make clear that this is a big deal for the competition regulator
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