Red Faces All Round in This $8 Billion Buyout Fail

(Bloomberg Opinion) -- The collapse of the $8 billion buyout of biotech firm Swedish Orphan Biovitrum AB (Sobi) leaves some big names with red faces.

The aspiring buyer — a partnership between private-equity firm Advent International and Singapore investment fund GIC — lost the deal by a whisker; and there are grounds to believe this was foreseeable. The billionaire Wallenberg family, the 35%-shareholder who wanted the takeover to proceed, has been exposed as a willing seller but now has no immediate path to exiting its sizable holding at a comparable price.

To recap, Advent and GIC agreed to buy Sobi in September. They teed up the support of the Wallenbergs' Investor AB and a Swedish pension fund with 7%. Despite that, acceptances fell just short of the 90% level that they set as a condition to fulfill the offer. Having failed to hit the threshold, Advent and GIC could not forcibly buy out the minorities, securing the full control required to load up the company with debt.

Bad luck? Not really. The explanation for the drama lies in the attitude of 8%-shareholder AstraZeneca Plc. It declined to back the deal and wanted to buy some of Sobi's assets, Bloomberg News reported Friday.

There is a commercial relationship between AstraZeneca and Sobi. In 2019, the U.K. firm sold the Swedish biotech the U.S. rights to Synagis, a preventative drug for respiratory illness in infants, taking its stake in part payment. The Anglo-Swedish drugmaker distributes Synagis in the rest of the world. That linkage sets AstraZeneca apart from other shareholders. Its stake is clearly not just financial.

This wrinkle explains the savage market reaction. At around 176 Swedish kronor, the stock is back to almost exactly where it was before Bloomberg News revealed Advent's interest in August. There's little expectation there of a renewed bid with a sweetener: That probably wouldn't win AstraZeneca over. Nor is there any hope of a revised buyout offer with a lower acceptance condition: That wouldn't get financing.

A deal is still theoretically possible. If another pharma made an approach, such a bidder might settle for less than 90%. The snag here is that interested buyers could face anti-trust issues — and if a rival was ready to pounce, it's surprising it didn't move in recent weeks. As for another private equity deal, the key would be coming to some kind of accord with AstraZeneca before proceeding. 

It would of course have been better to address these issues before launching the bid. Did Advent and GIC assume that with the support of the Wallenbergs, they also had the support of AstraZeneca, given Investor AB has a 3% of the U.K. firm? For all their ties, the Wallenbergs and AstraZeneca are not the same thing.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

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