British respiratory drug maker Vectura to buy Skyepharma for $621 mn

British respiratory drug maker Vectura Group plc yesterday struck a deal to buy rival Skyepharma for £441 million ($621 million) in order to create a £1billion maker of inhalation devices for the treatment of respiratory diseases like asthma.

Under the all-share merger, Skyepharma shareholders will get 2.79 Vectura shares for every share they own, equivalent to 410.15 pence per share, a 13.6 per cent premium to Skyepharma's closing price of 361.06 pence on 15 March 2016.

Shareholders can also take 15 per cent of the overall offer in cash if they choose.

Post closing, SkyePharma shareholders will own about 41.75 per cent of the combined company, but the holding would be reduced to 37.62 per cent if SkyePharma opt for the £70 million under the cash alternative in full.

Vectura said that it had identified annual pre-tax synergies of approximately £10 million, which are expected to be fully realised by 2018.

The deal has the support of the boards of both companies as well as SkyePharma's biggest shareholder, HBM Healthcare Investments, which owns 28.5 per cent.

The enlarged company would have had a pro-forma market cap of £1.01 billion and generated pro-forma combined revenues of £153.9 million and pro-forma combined EBITDA of £50.5 million based on the last reported full-year results of both companies.

Both companies said that the merged company has proven expertise with all major inhalation platforms, dry powder inhaler (DPI) and pressurized metered-dose inhaler (pMDI) and smart nebulisers in the $35 billion global inhaled respiratory market.

Vectura said that its existing DPI capabilities and smart nebulisation technologies do not address the 38 per cent of the global inhaled respiratory market which is served by pMDI products, but with Skyepharma's capabilities, the enlarged group can access the wider global inhaled respiratory market.

In addition, the enlarged group's formulation expertise will cover both small and large molecules, including biologics, designed to treat airways disease.

"I would expect to see a number of new holders coming into this stock, given our mid-cap market capitalization with the combination," said James Ward-Lilley, Vectura's CEO, who will become CEO of the enlarged group.

"We have today really got the opportunity to be an industry leader in terms of the device and technology focused on inhaled respiratory airway disease," he added.