Novo Plans to Acquire CDMO Catalent
To most of us, it came as a big surprise when Novo Holdings, the investment company that manages the assets and wealth of the Novo Nordisk Foundation, announced its intention to acquire Catalent for an all-cash sum of $16.5 billion, as it looks to meet the continuing demand of its weight loss and obesity-targeting drugs Wegovy and Ozempic.
Catalent has been the main supplier of fill-finish and packaging services for Novo Nordisk’s Glucagon-like peptide-1 (GLP-1) syringes and injection pens, and the deal will see the sale of Catalent’s fill-finish sites in Italy, Belgium and Bloomington in the U.S. sold to Novo Nordisk, expanding its in-house manufacturing capabilities of weight loss and obesity-targeting drugs. The deal will see the company become better placed to capitalise on its success in the injectable weight loss drug market, in an industry that Goldman Sachs predicts will be worth $100bn by the end of the decade.
Whilst the acquisition is a significant one, Novo Nordisk’s share price was up 4% by the end of day trading, reaching a new high in market capitalisation at $423 billion, more than the GDP of its home country Denmark.
It’s not clear at this stage how other customers of Catalent’s CDMO services, and its staff at the three sites to be acquired by Novo Nordisk and elsewhere in its network of some 47 facilities across four continents, will be impacted by the news. In an interview with the Financial Times, Eli Lilly CEO David Ricks commented, “Given the nature of this transaction — a vertical integration where the client list of Catalent might number in excess of 100 entities, all of which plan to compete in some way with Novo Nordisk — it sets up for an interesting inquiry by everybody [including] politicians.”
More broadly, is this one of many deals reflecting a greater hunger (pun intended) for mergers and acquisitions to integrate and control more of pharma’s supply chain? Elsewhere, Swiss-headquartered Novartis reported a robust full-year performance, showcasing a 10% growth in net sales and an 18% increase in core operating income due to continuing momentum in innovation and through multiple positive Phase 3 trial outcomes. In response, the company’s capitalisation reached $222 billion, only slightly lower than its valuation around the start of the COVID-19 pandemic, but still significantly lower than its $250 billion peak valuation in 2015.
Catalent, Inc, a leader in enabling the development and supply of better treatments for patients worldwide, and Novo Holdings, a holding and investment company that is responsible for managing the assets and wealth of the Novo Nordisk Foundation, today announced that they have entered into a merger agreement under which Novo Holdings will acquire Catalent in an all-cash transaction that values Catalent at $16.5 billion on an enterprise value basis.
Transaction Overview
* Novo Holdings will acquire all outstanding shares of Catalent for $63.50 per share in cash. The purchase price represents a premium of 16.5% to the closing price of Catalent’s common stock as of February 2, 2024, the last trading day prior to this announcement, and a 47.5% premium to the 60-day volume-weighted average price as of February 2, 2024.
* In addition, the purchase price represents a premium of 39.1% to the closing price of Catalent’s common stock on August 28, 2023, the last trading day prior to Catalent’s announcement that its Board of Directors formed a Strategic and Operational Review Committee to conduct a review of Catalent’s business, strategy and operations, as well as Catalent’s capital-allocation priorities with a view towards maximizing value for all Catalent stockholders.
* Of Catalent’s more than 50 global sites, Novo Holdings intends to sell three Catalent fill-finish sites and related assets acquired in the merger to Novo Nordisk (CPH: NOVO), in which Novo Holdings has a controlling interest, shortly after the closing of the merger. These three sites are located in Anagni, Italy; Bloomington, Indiana, USA; and Brussels, Belgium.
* This transaction is aligned with Novo Holdings’ strategy of investing in established life science companies with strong long-term potential.
Alessandro Maselli, President and Chief Executive Officer of Catalent, said: “Over the past several years, Catalent has built a comprehensive end-to-end offering of services and capabilities to drive innovation in the healthcare system and improve patient outcomes. This transaction is a testament to our team’s hard work and dedication to this mission, and I am incredibly excited for this next step in our journey. We look forward to benefiting from Novo Holdings’ significant resources to accelerate investment in our business and enhance key offerings as we continue to offer premium development and manufacturing solutions for pharma and biotech customers.”
John Greisch, Executive Chair of the Catalent Board and Chair of the Strategic and Operational Review Committee, said: “This transaction delivers significant, certain and premium value to our stockholders. Novo Holdings believes in our vision and will provide Catalent with a strong foundation as we continue developing, manufacturing and supplying top products.”
Novo Holdings has a proven track record of successfully investing in the life sciences sector. Importantly, Novo Holdings’ purpose is to improve people’s health and the sustainability of society and the planet by generating attractive long-term returns on the assets of the Novo Nordisk Foundation.
Kasim Kutay, CEO of Novo Holdings, said: “We are excited to partner with Catalent as it enters a new phase of growth and accelerates its mission to develop, manufacture and supply products that help people live better and healthier lives. With our expertise and track record of investing in high quality life sciences businesses, we believe Catalent is a very good strategic fit. We are excited to support the Company’s stakeholders in the years ahead, especially employees and customers as they work to develop new products to benefit patients. As engaged investors committed to productive relationships with all our partners, we look forward to working with the Catalent team to realise the Company’s full potential.
Importantly, our acquisition of Catalent is aligned with our mandate to invest in high quality life sciences companies for the benefit of the Novo Nordisk Foundation’s mission and philanthropic causes.”
Marc Steinberg, Partner at Elliott Investment Management L.P., said: “As a significant investor in Catalent, Elliott fully supports the transaction announced today. We believe that this transaction, which is the culmination of a process led by the Strategic and Operational Review Committee of the Catalent Board, clearly maximizes value for Catalent stockholders. We commend Catalent’s Board and management team for delivering this outstanding outcome.”
Transaction Details
The merger is expected to close towards the end of calendar year 2024, subject to customary closing conditions, including approval by Catalent stockholders and receipt of required regulatory approvals. The transaction is not subject to any financing contingency.
Following an evaluation of possible value-maximizing alternatives, the Catalent Board unanimously determined that the transaction with Novo Holdings, which delivers a premium and certain cash value, is in the best interest of Catalent. Accordingly, the Catalent Board unanimously recommends that Catalent stockholders vote in favor of the merger.
In addition, Elliott Investment Management L.P. and certain of its affiliates have entered into a support agreement pursuant to which they have agreed to vote their shares of Catalent common stock in favor of the merger.
Following the closing of the merger, shares of Catalent will no longer trade on the New York Stock Exchange and Catalent will become a private company.
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