Sirtex Medical Limited Board recommends takeover proposal

Earlier today Sirtex Medical Limited (ASX: SRX) entered into a trading halt, but didn’t say why. This evening the company has informed the market why it entered into that trading halt.

The company announced it has entered into a binding scheme implementation deed with Varian Medical Systems Inc where it will acquire all of the shares of Sirtex for $28 per share.

Varian is a leader in developing and delivering cancer care. It’s headquartered in California and employs around 6,500 people around the world. Varian is listed in the US and has a market capitalisation of almost US$12 billion.

Sirtex said that it has received a number of unsolicited non-binding proposals to acquire the company and has engaged with these parties to decide if any of the offers would be put to Sirtex shareholders.

The $28 cash per share offer represents a 49% premium to the closing price of $18.83 per share on 29 January 2018 and a 53% premium to the volume weighted average price since Sirtex’s trading update on 17 January 2018.

The offer implies a fully diluted market capitalisation for Sirtex of approximately $1.58 billion and an enterprise value of $1.49 billion. Sirtex said that this represents approximately 18.6x of the mid-point of the FY18 forecast earnings before interest, tax, depreciation and amortisation (EBITDA).

The offer will be made pursuant to a scheme of arrangement and Sirtex shareholders will have the opportunity to vote on the scheme at a meeting to be held in May 2018.

The Board of Sirtex believes that the scheme is in the best interests of shareholders.

Interim Chairman, Dr John Eady, said “In recommending the Scheme, we have considered the future potential prospects and the risks associated with an investment in Sirtex. Whilst we remain confident that the company would continue to have a successful stand-alone future, we believe that the material premium provided by Varian and the certainty of [the] all cash consideration is an attractive outcome for shareholders”.

Foolish takeaway

Considering the premium that is being offered by Varian I can see why the Sirtex Board recommended the deal, I expect that it will be approved unless something dramatically changes between now and the vote in May.

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