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Global M&A Roundup Sep 1, 2017 – Advisory Board Company, Kite Pharma

Our previous Canadian Mergers & Acquisitions roundups can be found here. Our previous global M&A roundups can be found here.

Target: The Advisory Board Company (NasdaqGS:ABCO)

  • Industry: Healthcare – Research and Consulting Services
  • Acquirer: OptumInsight, Inc.
  • Target: The Advisory Board Company
  • Size: $2.9 billion
  • Consideration: 92% Cash, 8% Equity
  • Source of Funds: Cash, Common Stock
  • Sell Side Advisers: Goldman Sachs, Allen & Company LLC
  • Buy Side Adviser:
  • Legal Advisers: Hogan Lovells US LLP, Skadden, Arps, Slate, Meagher & Flom LLP
  • Expected Close: Q4 2017 or Q1 2018

OptumInsight entered into an agreement and plan of merger to acquire The Advisory Board Company (TABC) for $2.9 billion on August 28, 2017.

The deal will pay a consideration of $54.29 per TABC share. In addition, each RSU and PSU will be converted into common shares of the UnitedHealth Group (parent company of OptumInsight), restricted stock unit in UnitedHealth Group, or cash.

The transaction opens up opportunities for OptumInsight’s fast-growing population health services business by providing better tools for data management and analysis to physicians. OptumInsight will also gain exposure to TABC’s 4,000 global members, which will provide potential cross-selling opportunities in their Practices Research, Technology and Consulting product lines.

In a related transaction, Vista Equity Partners agreed to acquire TABC’s education business for $1.5 billion as it plans to scale the business. The two deals were part of a five-month strategic review that TABC initiated in order to establish a better focus and strengthen the company as they face a changing environment in the healthcare industry.

Target: Kite Pharma, Inc. (NasdaqGS:KITE)

  • Industry: Healthcare/Biotechnology
  • Acquirer: Gilead Sciences, Inc. (NasdaqGS:GILD)
  • Target: Kite Pharma, Inc. (NasdaqGS:KITE)
  • Size: $11.1 billion
  • Consideration: 100% Cash
  • Source of Funds: Cash, Debt
  • Sell Side Advisers: Centerview Partners, Cowen and Company, Jefferies,
  • Buy Side Adviser: Lazard, BofA Merrill Lynch
  • Legal Advisers: Skadden, Arps, Slate, Meagher & Flom LLP, Cooley LLP, Sullivan & Cromwell LLP

Gilead Sciences entered into a definitive agreement to acquire Kite Pharma for an implied Enterprise Value of $11.1 billion on August 27, 2017. The transaction includes a $10.6 billion consideration to shareholders, $1.2 billion in options, and $781 million in cash and short term investments.

Gilead will pay a consideration of $180 per Kite Pharma share. Any Kite Pharma options, warrants and RSUs will also be entitled to a cash payment. Following closing, Gilead will acquire all remaining shares through a second step merger.

Kite Pharma has agreed to “no-shop” restrictions and will become an operating subsidiary of Gilead after the transaction.

The deal will be financed using a combination of cash on hand, bank debt and senior unsecured notes.

Kite is involved in the research, development and production of cancer treating drugs, however, has no approved therapies on the market yet. The company uses CAR T-cell therapy which is a highly personalized treatment and a highly difficult product to manufacture.

The investment would provide Gilead with exposure to the cancer treatment industry but the company will face pricing challenges as treatments could cost as much as $325,000 per session. This would cost less than stem cell therapy but may still not be affordable for many patients in the United States who are not fully covered by their insurance plans.

To better understand our M&A write-ups, please refer to the following:

Mergers & Acquisitions
Cash or Stock Consideration for M&A
Accretion/Dilution Part I: EPS, Earnings Yield & All-Stock Transactions

Accretion/Dilution Part II: Math and Breakeven Premiums

Accretion/Dilution Part III: Using Debt for Acquisitions
Accretion/Dilution Part IV: Synergies & Sources of Funds

Sara Troka is a first year HBA student at Ivey Business School. Sara will be joining a bank in NYC next summer. She was involved in the York Finance Club as VP Marketing and the York University Student Investment Fund as a Junior Analyst. Outside of finance, Sara enjoys photography and fashion. She is an avid traveler who enjoys exploring historic cities and beaches across Europe.

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