CDH Investments makes $1.9 billion bid for Sirtex Medical Limited (ASX:SRX)

Varian's offer for Sirtex Medical Limited (ASX:SRX) at $28 a share seemed attractive, but CDH Investments raised it by 20%.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

CDH Investments is serious about the acquisition of Sirtex Medical Limited (ASX: SRX), the Australian life-sciences company that produces a selective internal radiation therapy (SIRT) for liver cancer sold in more than 40 countries.

The Chinese alternative asset manager made a binding cash offer on Tuesday that confirms the previous indicative proposal announced by Sirtex on May 4 and values the target at $33.60 per share, less any dividend of up to 30 cents per share. This amounts to a total valuation of $1.9 billion.

The offer entails a significant premium on the company's May 3 closing price of $27.85, and is considerably higher than the competing bid from American cancer care company Varian, which offered $28 a share.

Varian's proposal received the support of Sirtex's board in January, resulting in a scheme implementation deed. This gives Varian the right to submit a counterproposal to the CDH bid, but yesterday the company made clear it doesn't intend to change its offer, which it believes remains superior.

Despite the lower price, Varian's bid does have some pros. It's already been endorsed by Sirtex's directors and received all necessary regulatory approvals, so it just needs shareholders' vote to become effective. CDH instead would still need to get the green light from the Foreign Investment Review Board (FIRB), and from regulators in the other countries where Sirtex operates.

Sirtex's board is considering the merits and risks of both proposals – including the offer prices, the risks, and timing to completion – and will recommend the offer in the best interests of shareholders. Pending the review, the board confirmed its unanimous support of the Varian scheme.

Amidst this uncertainty, Sirtex announced that in the first four months of 2018 sales declined 11% on the previous corresponding period. The company now expects FY18 underlying EBITDA at the lower end of the previously issued guidance of between $75 million and $85 million. At the time of writing, the stock is 4% down to $28.60.

Foolish takeaway

While CDH's proposal would still need to get all the regulatory approvals that Varian has already obtained, I think the Chinese bidder has an edge.

If regulators permitted the acquisition once, I don't see why they would deny it to CDH, and the offer price of $33.60 entails a 20% premium on the competing proposal, which is hard to ignore.

Motley Fool contributor Tommaso Autorino has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »