California biotech company Chiron Corp. said Monday that it agreed to accept a sweetened buyout offer of $5.1 billion from Swiss drug giant Novartis in a deal that reflects the global vaccine market's growing importance.
Novartis, which already owns 42% of the Emeryville, Calif.-based flu vaccine maker, was rebuffed in September when it bid $4.5 million, or $40 a share, for the balance of Chiron's shares. The latest bid is $45 a share.
Both companies' stock rose Monday. Chiron gained 74 cents to $44.14. Basel, Switzerland-based Novartis was up 42 cents to $53.82.
Chiron's non-Novartis directors unanimously approved the all-cash deal, which the company said could be completed in the first half of next year if approved by Chiron shareholders and U.S. and European regulators.
Novartis was formed by the 1996 merger of Sandoz and Ciba-Geigy, two Swiss health and drug giants. It reported net income of $5.8 billion on sales of $28.2 billion last year.
Founded in 1981 as one of the nation's first biotech companies, Chiron has long been regarded as a research powerhouse that was less effective at commercializing its discoveries. It posted net income last year of $78.9 million on sales of $1.7 billion.
The company, whose shares traded above $55 in late 2003, has been hurt by production problems that forced it to shut down its British flu vaccine plant last year, causing a shortage and raising questions about Chiron's management.
Although the plant has been cleared to resume production, and the company's stock has partially recovered, Chiron said last month that it would not meet its earnings forecast for the year.
Chiron said the deal was "in the best interests of shareholders" and would allow the business to grow and bring new products to market.
Novartis may have viewed Chiron as a good value after its share price plunged well below $35 in the wake of its flu vaccine problems, analysts said. The European pharmaceutical maker also may have believed that by taking control of Chiron it could better protect its stake, they said.
Novartis said it valued the biotech company's vaccine business, viewing it as an entree to a growing global market that analysts say could surpass $10 billion within two years. Fears of a bird flu pandemic have driven many governments to order drug stockpiles.
