Behind the scenes of J&J’s $30B Actelion buyout: Walkouts, Sanofi’s blunder and a $230M sweetener

Sanofi may understand how to jump into a buyout negotiation, but they still have a long way to go before understanding how to close a big deal.

Joaquin Duato (Credit: Endpoints News)

In a prospectus published early today, Actelion explained how J&J’s Joaquin Duato and Paul Stoffels first broached a deal at the beginning of 2016, pushing past a collaboration counter offer to advance takeover talks right to the end of the year. And after a temporary rupture, J&J came back to win the deal with a $30 billion bid and a rich $230 million pact on an experimental therapy that the Actelion board is spinning into a new company.

Last December, the French pharma giant Sanofi was widely identified as the big player that managed to push J&J away from negotiations that had actually begun at the start of 2016. Identified only as Company A in J&J’s newly filed prospectus, Sanofi CEO Olivier Brandicourt came in with a higher bid that J&J was unwilling to match. But after J&J took its checkbook and walked, Sanofi made a tactical blunder. From the prospectus:

Company A (Sanofi) indicated that it would only be willing to proceed with a transaction on the basis of a price lower than its previously communicated offer price and on different terms, and that Company A had extensive due diligence requests with respect to Actelion and its business. Later that day, the Board of Directors, with representatives of Niederer Kraft & Frey in attendance, considered the nominally higher indicative price proposed by Company A, as well as the tenor and content of management’s meetings with Company A. After discussing the significant uncertainty presented by a potential transaction with Company A and the likelihood that a transaction could ultimately be reached with J&J at a desirable price, the Board of Directors authorized Mr. Garnier to re-engage with J&J because the Board of Directors considered that this path was more likely to result in a transaction that would maximize value for Actelion and its shareholders.

Even though the two final bids were almost equivalent, Actelion decided to stick with J&J CEO Alex Gorsky, who they trusted more, and Sanofi was shoved away for the last time. That was Sanofi’s second mistake at the deal table. Pfizer had already muscled past the company in its $14 billion acquisition of Medivation.

In the end, Actelion split up the company, selling the portfolio of marketed drugs while partnering on a pipeline that is spinning out into a new company with a billion dollars in liquidity and some rich deal terms.

The prospectus also revealed that J&J has agreed to pay $230 million in cash to opt in on ACT 132577 — a metabolite of macitentan — at the end of an ongoing Phase II, provided they like the data. If they do, then the two companies will share development rights with a royalty for NewCo that starts at 20% and reaches up to 35%.

As already announced, ponesimod and cadazolid, two late-stage pipeline products, remain with Actelion following the spinout with a revenue sharing agreement in place with J&J.

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