CSL (ASX:CSL) share price enters halt as $16.7b Vifor deal expected to be announced

Investors are eagerly awaiting news on whether CSL will make a multi-billion dollar acquisition…

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The CSL Limited (ASX: CSL) share price is frozen in time amid a highly anticipated announcement.

CSL, the nation’s largest biotechnology company, is expected to reveal the verdict on a $US12bn (A$16.74bn) deal to acquire Swiss firm Vifor Pharma today. The potential acquisition target is a specialist in iron deficiency treatments, pulling in ~A$2.66 billion in revenue during the trailing 12-month period.

This follows nearly two weeks of rumours regarding a potential transaction stemming from 2 December. However, both biotechnology companies confirmed they were in talks yesterday.

What is on the table?

Investors are awaiting the release of an announcement from CSL today to discover the details of a potential deal with Vifor. Now that the CSL share price has entered a trading halt, it seems we are on the brink of knowing exactly how it would look.

Yesterday, reports indicated there was no certainty of a transaction. As reported by The Australian, a spokesperson for CSL suggested that there was no hard-set decision on if and when a transaction would eventuate.

Meanwhile, sources privy to the discussions said that the Australian biotech would look to raise ~US$4 billion to make the deal. If the company goes ahead with acquiring Vifor, it would mark CSL’s first acquisition in more than 10 years.

Despite the magnitude of a possible acquisition, some analysts are hazy on the strategic rationale behind such an addition. For instance, Macquarie analysts David Bailey and Rachael Harwood said:

[There is] limited obvious product alignment. As such, the potential strategic rationale for the transaction is not immediately apparent.

Shareholders will be hoping an acquisition gives rise to a renewed rally in the CSL share price. In the past, the biotech giant has delivered phenomenal returns. However, since the beginning of this year, the company’s shares have gained an underperforming 4.3%.

What’s next for the CSL share price?

According to the announcement, the CSL share price will remain frozen until the company publishes its announcement regarding a potential material acquisition and associated capital raising. Either that or shares will recommence trading on 16 December 2021 — whichever comes first.

Currently, Australia’s second-largest listed company holds a market capitalisation of $135.9 billion.

In terms of free cash, CSL reported US$1.814 billion of cash and cash equivalents at the end of June. Additionally, the biotech has ~US$4.6 billion of debt on its books.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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