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Sirtex agrees to $1.6bn US takeover

Morningstar with AAP  |  31 Jan 2018Text size  Decrease  Increase  |  
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SYDNEY - [AAP] Australian-based liver cancer treatment developer Sirtex Medical (ASX: SRX) has agreed to a $1.6 billion takeover offer from US company Varian.

Sirtex distributes a radiation therapy to more than 1,090 hospitals in over 40 countries, and currently has a market value of $1.05 billion.

Varian, which is listed on the New York Stock Exchange with a market value of $US11.8 billion, is based in California and develops radiotherapy and screening technology to treat cancer.

Sirtex said Varian was one of several parties to lodge non-binding takeover proposals in late 2017, and its cash offer of $28 per share was deemed to be in the best interest of shareholders.

The takeover follows an eventful and troubled 2017 for Sirtex, which suffered a $26.3 million full-year loss after making a $90 million writedown.

The company's shares plummeted below $11 in May after unfavourable results for a clinical trial, while in January the company sacked its former CEO, Gilman Wong, after an investigation into his trading in the company's shares in 2016.

In 2018, however, Sirtex's fortunes and share price have improved after the company gave a trading update on January 17 flagging improved first-half earnings and a turnaround in second-half sales.

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Sirtex shares traded at $18.83 before being halted from trade ahead of Tuesday's announcement.

Interim Sirtex chairman John Eady said the board had considered the company's future prospects before recommending the Varian deal.

"Whilst we remain confident that the company would continue to have a successful stand-alone future, we believe that the material premium provided by Varian and the certainty of all cash consideration is an attractive outcome for shareholders," he said in a statement.

Varian chief executive Dow Wilson said Sirtex would complement the company's existing cancer treatments, and he looked forward to expanding Sirtex's business.

Morningstar equities analyst Alex Morozov said he was "neutral" on Varian's acquisition of Sirtex, saying it will be challenging for Varian to significantly expand the market for Sirtex's product.

"With the acquisition of Sirtex, Varian is expanding in tangential areas of oncology treatments, but we hold a rather restrained opinion of Sirtex's product portfolio and future potential," Morozov said.

"We maintain our valuation and moat rating for Varian but will be raising our fair value estimate for Sirtex to match the offer price, as we anticipate the deal will close as expected."

Shareholders are likely to vote on the takeover proposal in May, and if approved the deal could be completed by the end of that month.

 

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© 2021 Australian Associated Press Pty Limited (AAP) or its Licensors. This is the Morningstar service with content provided by AAP where indicated. AAP reserves all rights, including copyright, in services provided by it. The information in the service is for personal use only, does not constitute financial product advice (whether general or personal) and may not be re-written, copied, re-sold or re-distributed, framed, linked or otherwise used whether for compensation of any kind or not, without the prior written permission of AAP. You should seek advice from a professional financial adviser before making decision to acquire or dispose of a financial product.

This service is published for general information purposes only without assuming a duty of care. AAP is not in the business of providing financial product advice (whether personal or general advice), and gives no warranty, guarantee or other representation about the accuracy of the information or images contained in this service. AAP is not liable for errors, omissions in, delays or interruptions to or cessation of the services through negligence or otherwise. The globe symbol and "AAP" are registered trademarks.

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