CLS Buying Talecris

SYDNEY (Reuters) – Australia’s CSL Ltd (CSL.AX: Quote, Profile, Research, Stock Buzz), the world’s top maker of blood plasma products, is buying smaller U.S. rival Talecris Biotherapeutics Holdings Corp for $3.1 billion, to boost its presence in the fast-growing biopharmaceutical industry.

Talecris, which operates 56 plasma collection centers and two manufacturing facilities in the United States, is being sold by its private equity owners, Cerberus Partners and Ampersand Ventures.

“The price they are paying is probably a pretty full one, but CSL would be able to extract quite a few synergies,” said Sean Fenton, a fund manager with Tribeca Investment Partners, which oversees about A$650 million ($571 million), including CSL shares.

Analysts said the deal would lift CSL’s 2008/09 earnings per share by 10 percent, driven largely by cutting costs. The deal represents a price to core earnings multiple of 12.7, which fund managers said was fair, but CSL’s scale of operations would enable it to extract cost savings.

“This is a highly accretive transaction, though there are some execution issues,” UBS analyst Dan Hurren said.

CSL, which makes products out of blood plasma to treat immune deficiencies and blood disorders, like hemophilia, also reported a 30 percent rise in fiscal 2008 profit to A$702 million.

It also makes vaccines, like flu vaccine and licensed its cervical cancer vaccine to Merck & Co Inc (MRK.N: Quote, Profile, Research, Stock Buzz).

Talecris generated $1.2 billion sales for the year to end-June and earned core earnings of $258 million.

“The rationale for the deal is that CSL’s operating margins are much better and they can take that business and drive up towards their margin,” Fenton said.

ENHANCE DOMINANCE

CSL said the proposed deal, subject to regulatory approvals including from antitrust authorities, would enhance its position in the $15 billion global plasma products market. It would give CSL access to fast growing key plasma products such as Gamunex and Prolastin and expand its geographical presence.

The deal would also boost CSL’s position against rivals Baxter International (BAX.N: Quote, Profile, Research, Stock Buzz), Spain’s Grifols (GRLS.MC: Quote, Profile, Research, Stock Buzz) and privately-owned Swiss group Octapharma.

The global plasma therapies industry has grown at a compounded annual rate of 10 percent over the past decade, CSL said, as doctors look for new ways to treat bleeding disorders, infections and diseases. CSL expects the strong growth to continue.

“In a revenue sense, certainly 10 percent is not an unreasonable assumption with our current information,” CSL Managing Director Brian McNamee told a briefing.

CSL plans to raise $1.5 billion through an institutional share placement to fund part of the deal, and would raise $1.6 billion in debt to complete the transaction.

McNamee said he anticipated support for the proposed equity raising, which was fully underwritten by Merrill Lynch.

CSL expects synergy benefits of about $225 million per annum, to be realized over three years.

CSL shares were halted on Wednesday pending the announcement. The stock closed at A$39 on Tuesday, having gained nearly 29 percent over the past year. The new shares are being sold in a range of A$34.50-A$39.00 each, according to a term sheet seen by Reuters.

By Denny Thomas
(Additional reporting by Sonali Paul)