Relypsa Finally Finds Buyer, but Potential Seen For Rival Bid

Shares of Relypsa are rallying after the company announced it has agreed to be acquired by Galenica Group in a $1.53B deal.
By The Fly Staff ,

Shares of Relypsa (RLYP) are rallying after the company announced it has agreed to be acquired by Galenica Group in a $1.53B deal. In a research note this morning, Wedbush analyst Liana Moussatos told investors that while Galenica's $32 per share offer is acceptable, she believes it leaves room for additional bidders, such as Sanofi (SNY) - Get Report .

ACQUISITION: Galenica Group and Relypsa announced today that the companies have entered into a definitive agreement under which Galenica will acquire Relypsa. Under the terms of the merger agreement, Galenica will pay $32 per share in cash, or a total of approximately $1.53B. The Boards of Directors of both Relypsa and Galenica have approved the terms of the merger agreement. The acquisition, which is expected to close during the third quarter, is structured as an all-cash tender offer for all outstanding issued common stock of Relypsa followed by a merger in which remaining shares of the company would be converted into the same U.S. dollar per share consideration as in the tender offer.

OTHER POTENTIAL SUITORS: While Wedbush's Moussatos sees Galenica's $32 per share offer as acceptable, she thinks that there will be at least one additional bidder for Relypsa. Estimating the potential for the company's peak annual sales to reach over $1B just in the U.S., the analyst views Galenica's offer of $1.53B as approximately one-time peak sales. Further, Moussatos pointed out that Reuters reported on April 7 that Relypsa had received multiple overtures from possible buyers. Sanofi may be a likely additional suitor, the analyst contended, noting that the French pharmaceutical company announced a two year agreement with Relypsa last year in which Sanofi provides commercial support from its nephrology sales force and receives a service fee and potential incentive payments. Moussatos reiterated an Outperform rating and $51 price target on Relypsa's shares.

PRESCIENT CITI CALL: Following ZS Pharma's acquisition by pharmaceutical giant AstraZeneca (AZN) - Get Report late last year in a $2.7B deal, Citi analyst Yigal Nochomovitz contended in a note to investors on November 6 that he saw "no reason" why Relypsa wouldn't be the next takeover target. The analyst said ZS Pharma's ZS-9 and Relypsa's Veltassa for the treatment of hyperkalemia were "much more similar than different," and estimated that both may achieve peak U.S. sales of about $1B by 2023. Moreover, Nochomovitz argued in his note that the $1.9B valuation gap between the two stocks at that time was "embarrassing from a market efficiency perspective."

PRICE ACTION: In morning trading, shares of Relypsa have jumped more than 58% to $31.81.

Reporting by Jessica de Sa-Mota.

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