Friday RAW: are bidders circling Sobi again?

Lately, M&A reporting has been going a bit gonzo. This week alone we’ve had a recruitment website claim that Occidental Petroleum was about to buy Apache (denied) and reports on a Spanish-language site that Reckitt Benckiser had outbid P&G in an auction to buy Church & Dwight (also denied). Meanwhile, the more reputed media were running with stories about Bayer bidding for Monsanto (first denied, then confirmed).

This upsurge in bum steers, bogus denials and half-baked tales in obscure places makes FT Alphaville’s RAW warning ever more essential. Please, read the damn warning.

This week, the RAW has mostly been about Swedish Orphan Biovitrum, a rare-disease medicines maker better known as Sobi. The group has regularly been touted as a bid target for key partners Pfizer and Biogen, and last year terminated talks widely reported to be with Pfizer.

Sweden’s Dagens Industri reheated the theory on Tuesday. It might be onto something.

According to usually well-informed people, Pfizer, Biogen and Actelion have all made indicative offers to buy the drug maker at prices between 160 and 190 Swedish krona. These offers are said to have elapsed in late April or early May, having been given no encouragement by Investor AB, the investment vehicle controlled by Sweden’s billionaire Wallenberg family that owns about 40 per cent of Sobi stock.

Negotiations are said to still be alive, however, with a fairness opinion rumoured to be in the works. The most likely endgame, according to usually well-informed people, is that Sobi will respond to the renewed bid interest by launching a review of options that could kickstart a formal auction.

Banks involved are said to include BNP Paribas, JP Morgan, Goldman Sachs and Moelis & Company, though it seems none has reached the point of landing an official mandate. The chances of anything reaching a conclusion are, therefore, very far from certain.

Here come some more caveats. They’re important.

Note that Sobi CEO Geoffery McDonough said on a results call in late April that the company is not for sale and is confident of its standalone strength. A Sobi spokesperson reiterated that message when we asked this week, as well as giving a standard “no comment” on the speculation of approaches.

Note also that Sobi’s outgoing chairman Bo Jesper Hansen sold 8m shares on May 4, which would be an odd thing to do while in takeover talks.

Note also that Biogen said in early May it was spinning off its haemophilia division, which is a partnership with Sobi and a main source of royalties. As Pareto Securities wrote last month:

If Biogen had been interested in expanding its footprint within haemophilia, it would have acquired Sobi or the European rights a long time ago. The haemophilia market is an oligopoly and the number of possible suitors for Sobi is limited. We believe that CSL [Behring], Baxalta/Shire and Bayer are disqualified based on anti-trust reasons and we also believe that neither CSL nor Baxalta/Shire have the financial muscle to pull a $5bn acquisition off. The most probable acquirer would be Pfizer, as we see it. Sobi already has an extensive manufacturing collaboration with Pfizer and it lacks next generation products.

Updates as and when they arrive. In the meantime, here’s the five-year chart.