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Novo Nordisk may still be nursing its wounds after failing to buy rival weight-loss drugmaker Metsera. But the aggressive tactics it used are worth studying by future acquirers, as one way to tackle a knotty M&A problem.
To recap, Novo wanted to pay Metsera shareholders a chunk of its $10bn offer up front, and deliver the rest only once antitrust watchdogs had blessed the deal. During that waiting period, Novo would have held non-voting shares. This was designed to give Metsera a quick win. If regulators said no, Metsera shareholders would get to keep the cash, though Novo would be stuck with a 50 per cent voteless stake.
Novo came unstuck in two ways. First, the US Federal Trade Commission said Novo would have to go through the usual regulatory process before making that first payment. That deprived Novo’s offer of its main charm: immediacy. Second, rival Pfizer offered an all-cash, more conventional bid without the same antitrust problems.
As a tool in the M&A kit, the Novo two-step still looks pretty appealing. Imagine a situation where a seller frets that a deal may be anti-competitive, but the buyer is more confident. Upfront payment without control is a good way to square the circle. It could also unlock more value for bid targets. After all, buyers with the greatest antitrust risk are often those that can afford to pay most, since they already run similar businesses.
Biotech may be particularly suited to such arrangements. First, because investors are accustomed to non-traditional bids. Takeovers in the drug start-up world often include features such as “contingent value rights”, where future payouts are tied to certain milestones being met down the line.
Moreover, obesity drugs, in particular, are in high demand. So should a bidder fail and be stuck with a large non-voting stake, there’s a reasonably good chance another buyer will put the first comer out of their misery.
For the formula to work, a Novo copycat might have to make tweaks. For example, Novo’s offer imposed some restrictions on what Metsera could and could not do before the deal was approved. That muddied the water when it came to arguing that the non-voting shares do not meet the bar for notifying the antitrust authorities.
True, such conditions were rational from Novo’s perspective: it would hardly want to see Metsera take its first slug of cash and then sell off its crown jewels to another bidder. Still, a future buyer using this technique might have to take more on trust, if they can stomach it.
The Danish company itself may not be quick to revive this strategy, having been publicly knocked back. Chief executive Mike Doustdar, only three months into the job, should probably take a break from aggressive deals. But the two-step he attempted may get another airing soon enough. Making drugs involves trial and error; why not M&A too?
gaia.freydefont@ft.com
