The world's richest man, Microsoft chairman Mr Bill Gates, will own a 3 per cent stake in Northern Ireland pharmaceutical group Galen Holdings once Galen completes its £260 million (€330 million) takeover of the Dublin-based pharmaceutical group Warner Chilcott.
Mr Gates currently has a 12 per cent stake in Warner Chilcott, but this will dilute to 3 per cent of the merged group under the terms of the all-share deal with Galen. Galen is swapping 2.5 of its own shares for each Warner Chilcott share, an offer that values the Nasdaq-listed Warner Chilcott shares at $23.94 (€26.84), a 33 per cent premium on Wednesday's $18 closing price.
At current prices, the enlarged company will have a stock market value of just under £1 billion sterling (€1.7 billion). Galen, which already has listings in London and Dublin, will take an additional listing on Nasdaq with the aim of attracting a greater level of US institutional investment.
Three-quarters of the shares in the enlarged company will be held by Galen shareholders with one-quarter held by Warner Chilcott's shareholders, who, apart from Mr Gates, include Dublin pharmaceutical group Elan, US institutions and the Warner Chilcott management.
The deal has been welcomed by the markets although Galen shares fell back after early gains. Galen and Warner Chilcott are seen as an ideal fit. Both specialise in women's healthcare products and the acquisition will give Galen access to Warner Chilcott's extensive sales network in the US for its own products, particularly its intravaginal ring (IVR) drug-delivery system.
"The combination will allow us to geographically expand the distribution of our women's healthcare portfolio, including our IVR product, within Galen, without having to give away value from out-licensing deals," said Mr John King, Galen's chief executive officer.
Warner Chilcott chief executive, Mr Roger Boisseneault, who becomes chief executive of the merged company, said he had informed the trust which looks after Mr Gates's personal investments and was confident the Microsoft chairman would retain his stake in Galen.
Mr King, who becomes executive chairman of the merged group, said: "We'd be delighted to have somebody like Bill Gates as a long-term shareholder and we would also be happy for Elan to remain as a long-term investor too." Elan currently holds a 19.6 per cent stake in Warner Chilcott but this will fall to around 5 per cent when the takeover is completed.
Galen's move into the huge US pharmaceutical market comes just 18 months after its proposed £1.5 billion sterling (€2.6 billion) merger with the privately owned Dutch group, Ferring, collapsed - a victim of the heavy fall in stock-market valuations in the second half of 1998.
Mr King said that after the collapse of the Ferring deal, Galen had taken a strategic decision to switch its focus to the US market.
The fact that Galen's shares have recovered strongly since the Ferring deal collapsed has meant the Northern Ireland group has been able to use its own equity to fund the Warner Chilcott acquisition, which Mr King said would be earnings enhancing in year one despite the additional shares in issue.
The issue of the 31 million new Galen shares to Warner Chilcott investors will go some way towards improving the liquidity of Galen shares. Despite chairman and founder Dr Allen McClay and Mr King selling seven million shares late last year, Galen shares are still very tightly held, with Dr McClay holding 31 per cent and Mr King 17 per cent.
These stakes will dilute to around 23 per cent and 13 per cent, respectively, when the deal is completed.
Just over half of Warner Chilcott shareholders are US institutions which will now receive Galen shares. Galen will be hoping these investors will remain and that the Nasdaq listing will attract more US investment.
