The ball in a “three-way tennis game” between Beckman Coulter Inc. and Inverness Medical Innovations Inc. lies in Biosite Inc.’s court.
Fullerton’s Beckman Coulter and Inverness of Massachusetts are locked in a battle to buy San Diego-based Biosite, a maker of diagnostic tests. Beckman’s offering $1.55 billion. Inverness upped the ante to $1.6 billion.
Some see the prospect of a bidding war,beyond what already took place before Beckman made its late March offer, which valued Biosite at 50% more than what it had been trading at.
For now, it’s a waiting game as Biosite weighs the Inverness counter offer.
“Right now, if you think of it as a three-way tennis game, the ball right now is in Biosite’s court,” said Quintin Lai, a life sciences and diagnostics analyst with Robert W. Baird & Co. in Milwaukee. “If Biosite determines that the (Inverness) financing is sound, then $90 will rule the day.”
Inverness is offering $90 a share for Biosite, versus $85 for Beckman.
“In that case, the ball then goes to Beckman’s court, and Beckman has to determine what they do,” Lai said. “It’s still not clear to me whether we’ll see lots of rounds of increased bids.”
Investors seem to expect a richer offer. Biosite’s shares were trading at about $93 last week with a market value of $1.5 billion. (The offers from Beckman and Inverness exceed Biosite’s market value because they account for employee stock options that haven’t been exercised yet.)
Beckman, a maker of instruments and chemicals for medical testing labs and researchers, hopes enough Biosite shareholders will sign off on its original offer, which has financing lined up and promises a quick close. The company’s offer is good through Friday.
Beckman spokesman Paul Whitlock declined to comment on whether the company might come in with a higher offer.
“We have our offer in and it expires on the 27th,” he said.
Beckman’s strategy has been to cast doubt on Inverness’ offer, calling it “speculative.”
Inverness, in a Securities and Exchange Commission filing, said it has proposed financial commitments from General Electric Co.’s GE Capital, UBS Loan Finance LLC and UBS Securities LLC. The company has yet to specifically outline how it will pay for a deal.
Biosite isn’t discussing a public timeline for considering Inverness’ offer, a company spokeswoman said.
Beckman doesn’t have to increase its bid, analyst Lai said, “until Biosite decides their bid is no longer good.”
Biosite, which already has accepted Beckman’s offer, would have to pay a $50 million breakup fee to walk away, he said.
Beckman received antitrust approval to buy Biosite last week.
Lai said his money is on Beckman: “Beckman’s deal is looking more and more certain every day. Hart-Scott-Rodino is over in respect to the (Federal Trade Commission). The money is there.”
Jeffrey Frelick, a diagnostic device analyst with Lazard Capital Markets, has a different take.
“At this point, it appears that (Biosite’s) shareholders would look favorably on Inverness’ offer,” he said. “And if Beckman wants to pursue the Biosite acquisition, it would likely have to raise its bid.”
Beckman could face shareholder resistance, Frelick said. The company’s shares dropped on word of its original 50% premium in late March.
“You have some shareholders that would kind of balk at them raising the offer,” he said. “I think you also have some folks who think they could stretch this to $90 to $93 if they want to get aggressive. But I don’t think they will go beyond that.”
Inverness “will likely remain aggressive in the bidding,” he said.
Biosite would boost Beckman in in-vitro diagnostics as well as against rival Roche AG of Switzerland, according to Frelick.
Prior to Beckman’s offer, a bidding war took place behind the scenes in the past 15 months, an SEC filing by Biosite shows.
In January 2006, Beckman Chief Executive Scott Garrett called Kim Blickenstaff, Biosite’s chief executive, asking for a meeting to discuss a possible deal. The two met a month later, when Garrett gave Blickenstaff a written proposal contemplating a stock deal.
The companies talked various proposals from then until Beckman’s bid became public.
The talks hit a sticking point in July. Beckman, through Morgan Stanley & Co., informed Goldman Sachs & Co.,Biosite’s adviser,to stop working on any proposed deal because Beckman wouldn’t be able to offer a value acceptable to Biosite. At the time, Biosite was looking for $80 a share or more.
Then early this year, Garrett and Blickenstaff had a phone call where Garrett “reiterated Beckman’s interest in a possible acquisition of Biosite, indicating an ability to pay more than Beckman had previously proposed.”
Blickenstaff then e-mailed Garrett following the call and indicated if Beckman were interested in making a proposal to buy Biosite in a range that might interest Biosite’s board, he would listen. Garrett then sent an e-mail indicating that Beckman would consider how to proceed.
The filing shows that seven unnamed companies, one of which surely is Inverness, contacted Biosite with various buyout proposals. Biosite’s contact with the seven companies spanned the gamut.
One company, identified as “company C” in the filing, appears to have shown a degree of tenacity in its talks with Biosite. Company C’s chief executive, according to the filing, first called Blickenstaff to talk about a possible “business combination” in May 2006.
In June, after Biosite expressed disinterest in being acquired, company C sent a letter saying it was interested in buying Biosite for $60 a share, a 36% premium at the time.
Biosite’s board authorized its senior management “to advise company C that Biosite was not interested in a transaction with company C at the value (and on the other terms) then being proposed by company C,” according to the filing.
Eventually, company C sent Blickenstaff an unsolicited written proposal in February for $75 a share, payable in cash, which represented a 35% premium.
About a week afterward, Biosite’s board authorized management to tell company C that it wasn’t interested in pursuing a deal with the latter at the proposed valuation level.
Beckman’s offer came a few weeks later on March 26.
