CSL (ASX:CSL) share price down 8% after raising US$4.5bn

CSL’s shares are back from their trading halt…

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The CSL Limited (ASX: CSL) share price has returned from its trading halt on Thursday morning.

At the time of writing, the biotherapeutics company’s shares are down 8.5% to $272.51.

Why was the CSL share price halted?

The CSL share price was placed into a trading halt on Tuesday whilst it launched an equity raising.

The institutional component of the capital raising is now complete and raised US$4.5 billion (A$6.3 billion) at A$273.00 per new share. This represents an 8.2% discount to its last close price.

Management advised that the placement received strong support from existing shareholders and new investors.

CSL will now push ahead with its non-underwritten US$534 million (A$750 million) share purchase plan. These funds will be raised at the lower of the placement price and a 2% discount to the five-day volume weighted average price of CSL’s shares up to and including the closing date.

CSL’s Chief Executive Officer and Managing Director, Mr Paul Perreault, said “We appreciate the support we received from the investment community, including existing and new shareholders, for what is the largest ever primary equity raise in Australia. We are now pleased to launch our share purchase plan for eligible shareholders on Tuesday, 21 December 2021.”

Why is CSL raising funds?

The proceeds from the equity raising will be used, along with new debt and existing cash reserves, to fund the acquisition of Swiss biotech giant Vifor Pharma for US$12.3 billion (A$17.2 billion) in cash.

Management notes that the deal expands its leadership across an attractive portfolio focused on renal disease and iron deficiency. It also highlights that Vifor has a high quality pipeline and complements CSL’s existing therapeutic focus areas including Haematology, Thrombosis, Cardiovascular, and Transplant.

The deal is expected to be low-to-mid teens NPATA per share accretive in the first full year of CSL ownership, including full run rate cost synergies.

Mr Perreault, commented: “Vifor Pharma enhances CSL’s patient focus and ability to protect the health of those facing a range of rare and serious medical conditions.”

“It brings an outstanding team and a leading portfolio of products across Renal Disease and Iron Deficiency and a proven partnering and business development and licensing strategy. Vifor Pharma will also expand our presence in the rapidly growing nephrology market, while giving us the opportunity to leverage our complementary scientific expertise.”

What was the response?

One leading broker that was particularly pleased with the deal was Citi. In response to the news, the broker upgraded CSL’s shares to a buy rating with an improved price target of $340.00.

Based on the current CSL share price, this implies potential upside of 25% over the next 12 months.

Citi commented: “We calculate the acquisition to be ~9% accretive to NPATA per share (NPAT before acquisition-related amortization) – a proxy for cash flow.”

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Motley Fool contributor James Mickleboro 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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