Boston Scientific to buy BTG in GBP3.3bn deal
Shares in medical technology company BTG rocketed on Tuesday as it agreed to be bought by US-based Boston Scientific for £3.3bn.
Boston Scientific Corp.
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10:59 25/04/24
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16:30 16/08/19
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Under the terms of the deal, which has been approved by the boards of directors of both companies, BTG shareholders would receive 840p in cash. This represents a 36.6% premium to the closing price of BTG on Monday and a 51% premium to the 90-day volume-weighted average share price.
BTG chief executive Louise Makin said: "Boston Scientific shares our commitment to transforming patient care, and has a sustained track record of innovation, clinical expertise and global commercial capabilities.
Boston Scientific said it has received irrevocables from Invesco, Novo Holdings and Woodford, which represent 32.8% of the target shareholders.
"We remain committed to transforming patient care through our passion for people, relentless curiosity, and ambition to lead the way. Boston Scientific shares that vision, and their comprehensive clinical and commercial expertise will accelerate the delivery of our strategy and expand the global reach of our interventional medicine portfolio. The strong strategic and cultural fit between the companies gives me confidence that our business will continue to make a real difference for our patients, customers, employees and wider stakeholders."
Boston Scientific chairman and chief executive Mike Mahoney said: "The acquisition of BTG and its rapidly growing peripheral interventional portfolio is an exciting extension of our category leadership strategy that will augment our capabilities in important areas of unmet need such as cancer and pulmonary embolism.
"We are confident that the addition of these therapies to our portfolio will ultimately advance patient care in ways that could not be realised by either company alone, while also allowing us to realize substantial revenue and cost synergies and provide a strong return for investors."
The transaction is expected to close in the first half of next year.
At 1230 GMT, BTG shares were up 34% to 825.50p.
RBC Capital Markets analyst Nick Keher said: "We see the deal as a good result for BTG shareholders, and think shareholders are likely to view the offer favourably, with the deal representing an EV of 11.5x CY19E sales for the Interventional Medicine business (likely the key target area for Boston Scientific and the area we see as having overlap between both companies today)."
BTG took a £150m charge in May’s numbers regarding its Pneumrx endobronchial coils (experimental lung disease treatments). This saw the shares struggle over the first half of the year, trading at 475p in mid-July, some 35% below the price at the start of the year.
"The shares have since been gradually recovering as management started to reposition the company," Olivetree Financial said.
"The bulk of revenues come from oncology and vascular interventional products, it is these that will be the driver for today’s announced acquisition. Growth in these areas is still expected to be in the mid teens percents for 2019 (albeit cut from mid-to-high teens previously). Criticism of management has generally stemmed from its lack of experience in dealing with early stage projects and the way in which performance in this arena has been allowed to dog the shares - the hope for Boston will be that these concerns are immaterial under a bigger umbrella," Olivetree said.
"With last week’s numbers showing that the core parts of the business are seemingly performing well, a cash takeout of this manner would appear to be attractive to all parties. Shareholders get a material premium whereas Boston gets to acquire a business where Interventional Oncology and Interventional Vascular, the core functions which represent more than 90% of interventional revenues, are still performing well."
Panmure Gordon said the price is "a fair, though not generous, valuation" for BTG, based on peer group multiples.
"However, we believe the price is significantly above the share price likely to be achieved by an independent BTG over the next 18 months as concerns over the impact of CroFab competition, which could result in price pressure and a related fall in profitability, in addition to uncertainty of the ability to deliver on the long term Interventional Medicine (IM) growth rate until data from the EPOCH and STOP-HCC studies are available in 2019, holds back the performance of the shares."
Panmure said a competitive bid is unlikely given the recommended offer and the fair price.
Meanwhile, Jefferies said the offer is shy of its street-high 900p price target but appears reasonable when considering that Boston Scientific is likely to focus on the Interventional Oncology franchise and EkoSonic for the treatment of pulmonary embolus, plus coronary catheters.