Horizon Pharma (HZNP) has gone hostile in its attempt to acquire Depomed (DEPO), offering $29.25 in HZNP stock, or $3 billion, for the smaller specialty pharma company after repeat confidential attempts in the first half of the year.
According to a Horizon press release on Tuesday, the company initiated discussions back in March. Depomed refused to engage and in June rejected the same all-stock transaction being offered today. The deal represents a 40% premium to Depomed’s stock price.
In a letter to Depomed’s board, Horizon says the deal would be immediately accretive and projects full-year pro forma net sales in 2015 in excess of $950 million. The combined entity would generate $350 million in EBITDA this year, says Horizon, and would have 13 products on the market.
DEPO was a $4 stock in 2011, quadrupling in the last four years as it successfully moved from drug development to marketing its own products. This January the company expanded its pain franchise to include Nucynta (tapentadol extended release), purchased from Johnson & Johnson (JNJ) for $1.05 billion. The drug did $170 million in 2014 sales, and Depomed has expanded the salesforce behind Nucynta by three-fold since.
The all-stock offer has been rejected privately once before, we know from Tuesday’s press release, thus we find it hard to imagine Depomed jumps at the public offer. But the channel is now open and a higher bid including cash is the likely outcome, in our view. What it takes to get a deal done remains to be seen. The fact that Depomed refused to even engage Horizon in the first quarter certainly says something about their interest in staying independent.
For a deeper dive on Depomed and Nucynta see Zacks Analyst Jason Napodano’s latest coverage.
