UK's BTG expands into oncology with 177 million all-share bid for Biocompatibles

UK specialist pharma company BTG (LSE: BGC) is stretching out into the cancer arena with an all-stock offer to acquire the issued and to be issued shares of oncology drug-device combination products firm Biocompatibles (LSE: BII). The value of offer is of the order of £160 million ($258.4 million), although first billed as £177 million, but BTG’s shares fell on the news bringing the paper value lower. Analysts saw the offer price as steep, and BTG’s shares fell 8% to 232.6 pence on Friday.

The transaction is proposed to be effected by means of a Scheme of Arrangement and is expected to complete in February 2011. The deal will allow BTG to boost Biocompatibles' product development line with greater investment and an international commercial infrastructure, according to the company. BTG said it anticipated annual savings of around £3 million as it reduced duplicated head office and administrative costs.

The BTG Board views the acquisition as an excellent opportunity to combine Biocompatibles' fast growing specialist products with its own existing commercial infrastructure. The enhanced resources of the enlarged group will allow accelerated investment in Biocompatibles' products and development pipeline. For its part, the board of Biocompatibles sees the move as an opportunity to exploit further the potential of the strong platform which has been built to date. Shareholders will benefit from a successful company with a broad portfolio of products (both directly marketed and partnered) and the significant upside potential in the combined development pipeline.