Grifols Agrees to Buy Talecris for $3.4 Billion

Grifols SA, Europe’s largest maker of blood-plasma products, agreed to buy Talecris Biotherapeutics Holdings Corp. for about $3 billion in cash and stock to expand its share to almost a third of the U.S. market.

The purchase values Talecris at $24.44 a share based on today’s closing price for Grifols. That’s 54 percent more than Talecris’s June 4 closing price on the Nasdaq Stock Market. The acquisition will add to Grifols’ earnings in the first year, with a “meaningful” boost beginning in the second year, the Barcelona-based company said in a statement today.

The deal gives Grifols the same share of the $7 billion U.S. market for blood-based infusions as Baxter International Inc. and more than CSL Ltd.’s 29 percent share, said Andrew Goodsall, a health-care analyst with UBS AG in Sydney. CSL, based in Melbourne, scrapped its proposed $3.1 billion acquisition of Research Triangle Park, North Carolina-based Talecris a year ago following an objection by the U.S. Federal Trade Commission.

“Talecris have been on the market only for a relatively short time and Grifols is quite hungry to expand,” said Stuart Roberts, who rates Australian health-care stocks at Southern Cross Equities Ltd. in Sydney. “My suspicion is that they’ve done their homework and decided that they wouldn’t be in danger of having the deal knocked back by the Feds the way CSL was.”

No FTC Problem

Grifols Chief Executive Officer Victor Grifols said on a conference call he doesn’t foresee any problems with the FTC and the acquisition probably will close in the fourth quarter.

“This operation is very different from the previous one,” Grifols said. “Grifols is a much smaller competitor than CSL in the U.S. and we don’t see any conflict that may leave the FTC uncomfortable about the combination of the two companies.”

Buying Talecris gives Grifols sales of Gamunex, a treatment for three immune-system disorders, and Prolastin, the biggest- selling treatment for Alpha-1 antitrypsin deficiency, a condition that can lead to lung disease. The two products accounted for 77 percent of sales in the three months ended March 31, Talecris said in a regulatory filing in April.

The purchase values Talecris at about 22 times last year’s net income, compared with price-earnings ratios of 11 for Baxter and 15 for CSL. Cerberus Capital Management LP, the New York- based private-equity firm that owns about 49 percent of Talecris, agreed to vote in favor of the purchase, Grifols said.

Financing Banks

Banks led by Deutsche Bank AG, Nomura Holdings Inc., Banco Bilbao Vizcaya Argentaria SA, BNP Paribas SA, HSBC Holdings Plc and Morgan Stanley, have agreed to finance the acquisition, Grifols said.

Talecris stockholders will receive $19 in cash and 0.641 of a newly issued, non-voting Grifols share for each Talecris share. Grifols fell 79 cents, or 8.5 percent, to close at 8.48 euros in Madrid trading, giving the company a market value of 1.8 billion euros ($2.16 billion). The decline was the biggest in almost seven weeks.

Talecris rose $3.99, or 25 percent, to $19.90 in Nasdaq trading. Before today’s announcement, the stock had slumped 34 percent from its record in February amid a slowdown in demand for blood plasma products in the U.S., Roberts said.

Grifols had 249 million euros in cash and equivalents as of Dec. 31, and long-term debt totaled 703 million euros, according to its annual financial filing.

Advisers

Nomura and BBVA advised Grifols on the deal, while Osborn Clarke SLP and Proskauer Rose LLP provided legal advice. Talecris’s financial advisers were Morgan Stanley, Citigroup Inc. and Natixis, and Wachtell, Lipton, Rosen & Katz, Arnold & Porter LLP and Uria Menendez were legal counsel.

Talecris was created in 2005 when Bayer AG sold its plasma business for about $590 million to New York-based Cerberus and Ampersand Ventures of Wellesley, Massachusetts. The plasma- product maker raised $950 million in an initial public offering in 2009, and had $605 million in long-term borrowings as of March 31 this year.

Grifols sold shares in an initial public offering in 2006. The company was founded in 1940 by a Spanish hematologist, Jose Grifols Roig. His son, Victor Grifols Lucas, owns 6.2 percent of the company’s shares, while the founder’s grandson, Victor Grifols Roura, is chairman and CEO and holds 0.2 percent of shares.

Plasma is the watery, yellow liquid that carries blood cells. Grifols, Talecris, Baxter and CSL pay healthy people to donate plasma at collection centers across the U.S., then spin it in a centrifuge to extract products such as immunoglobulins, albumin and blood-clotting proteins for treating hemophilia.

Talecris planned to spend as much as $800 million over the next five years to increase capacity by 43 percent, Chief Financial Officer John Hanson said May 13. The company is using about 85 percent of its production facilities and expects to reach full capacity in 2011. Capacity constraints will make it less efficient in processing blood plasma in the near term, eroding profitability, Talecris said in February.

To contact the reporters on this story: Simeon Bennett in Singapore at sbennett9@bloomberg.net; Carey Sargent in Geneva at csargent3loomberg.net

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