By Aron Adamski, BSc Economics @LSE
OVERVIEW OF THE DEAL:
- Acquirer: Nestlé Health Centre
- Target: Aimmune Therapeutics
- Industry: Biotechnology
- Estimated value: $1.9B
- Financing: All-cash
- Announcement Date: 31/08/2020
- Acquirer Advisors: Mayer Brown (legal)
- Target Advisors: J.P. Morgan Securities & Lazard (financial); Latham & Watkins (legal)
*Bank of America Securities acted as broker in the transaction.
Nestlé’s health arm signed a definitive agreement to acquire 80.4% stake in biopharmaceutical company, Aimmune Therapeutics, from a group of shareholders for $1.9B. The offer per share for the cash tender offer is $34.5 for outstanding shares and restricted stock unit of Aimmune, representing a 178.68% premium to share price 5 days before announcement. Nestlé also paid $116.8M for the options of Aimmune. The Swiss food manufacturer currently has a 25.6% equity stake in Aimmune, which includes 19.6% of voting common stock and the balance of non-voting preferred stock, worth about $473M. The deal will value Aimmune at $2.6B and is expected to complete towards the end of the year.
Nestlé Health Science will merge with Aimmune as the surviving corporation. Aimmune will no longer be a publicly traded company and will become a part of Nestlé Health Science and will operate as a stand-alone business within NHSc.
The merger agreement includes customary termination provisions for Nestlé and Aimmune. In case of termination of the merger agreement, Aimmune will be required to pay $85M. The tender offer is subject to customary conditions, including a sufficient number of shares of voting common stock of Aimmune to approve the merger. The agreement was unanimously approved by all of the independent members of the Board of Directors of Aimmune and approved by Board of Directors of Nestlé.
The acquisition is expected to close by mid-October 2020.
“This transaction brings together Nestlé’s nutritional science leadership with one of the most innovative companies in food allergy treatment. Together we will be able to offer a wide range of solutions that can transform the lives of people suffering from food allergies around the world.” ~ Greg Behar, Nestlé Health Science CEO
COMPANY DETAILS (Nestlé S.A.):
Nestlé S.A. manufactures and distributes food and beverage products in various categories, such as powdered and liquid beverages, water, milk products and ice cream, prepared dishes and cooking aids, confectionery and petcare. The company also manufactures and distributes nutritional science products through its globally managed business Nestlé Health Science and science-based solutions that contribute to the health of skin, hair and nails through Nestlé Skin Health. The company has factories in 86 countries and sells its products in 191 countries.
- Founded in: 1866
- Headquartered in: Vevey, Switzerland
- CEO: Ulf Mark Schneider
- Number of Employees: 291,000
- Market Cap: $333.37B
- EV: $370.81B
- LTM Revenue: $90.67B
- LTM EBITDA: $15.64B
- EV/ LTM Revenue: 4.09x
- EV/ LTM EBITDA: 23.71x
SUBSIDIARY DETAILS (Nestlé Health Science):
Nestlé Health Science manufactures and distributes nutritional solutions based on consumer health and medical nutrition. It offers solutions for aging, brain health, cancer and oncology, critical care, surgery, food allergy, metabolic diseases, obesity, and pediatrics. It was founded in 2011 and currently has more than 5,000 employees around the world, with a presence in 66 countries.
- Medical nutrition portfolio: products and services recommended by healthcare professionals for patients; most relevant for the institutional sector, such as hospitals, care facilities and homecare; current portfolio is focused on Pediatric Care & Food Allergy, Adult Medical Care and Acute Care.
- Consumer care portfolio: nutritional solutions to help consumers lead healthier lives; products are found in pharmacies, retail shops and on the internet; focused on the fast developing areas of healthy aging, healthy growth, gut health and metabolic health, and obesity in particular.
COMPANY DETAILS (Aimmune Therapeutics):
Aimmune Therapeutics is a biopharmaceutical company, which engages in developing and commercialising treatments for life-threatening food allergies. The company’s main therapeutic approach, which it refers to as Characterized Oral Desensitized Immunology Therapy (CODIT), is designed to desensitise patients to food allergens and thereby reduce the risk of having an allergic reaction upon accidental exposure or reduce symptom severity should an allergic reaction occur. As a result, CODIT could contribute to reducing the burden and anxiety experienced by food-allergic patients and their families.
- Founded in: 2011
- Headquartered in: Brisbane, California, United States
- CEO: Eric Bjerkholt
- Number of Employees: 300–400
- Market Cap: $2.24B
- EV: $2.07B
- LTM Revenue: $575K
- LTM EBITDA: -$277.79K
- EV/ LTM Revenue: 3895.65x
- EV/ LTM EBITDA: -8063.65x
Aimmune’s Palforzia therapy is the only FDA-approved treatment aimed at reducing the frequency and severity of allergic reactions to peanuts in children. The firm aims to leverage its expertise in the formulation and pharmaceutical development of biologic drug products from naturally available food protein to address other unaddressed needs, such as egg allergy.
STRATEGIC RATIONALE
GROWING NEED
Food allergies have risen at shocking rate in recent years. About 240M people suffer from food allergies worldwide and reactions to peanuts are the most common. In the US, about 2% of children are allergic to peanuts, 4 times more since 1997. With its extensive resources ($5.6B in cash) and capabilities, Nestlé Health Science will be able to grow Aimmune’s investment in its products in order to meet the growing demand for allergic reaction treatments.
FOOD ALLERGY PREVENTION PUSH
Last year, Nestlé began a push into the allergy prevention sector, taking a minority stake in Before Brands, which develops edible products designed to reduce the risk of allergy development in babies. With the acquisition of Aimmune Therapeutics, Nestlé will further grow its position in the allergy prevention sector which is growing at an increasing rate.
AIMMUNE’S STRONG POSITION
Aimmune Therapeutics owns Palforzia therapy, which is the only FDA-approved peanut allergy reactions treatment for children. Peanut allergies are the “leading” allergy in terms of emergency department visits worldwide. Hence, the acquisition will significantly strengthen Nestlé’s position in allergy treatment sector.
RISKS AND UNCERTAINTIES
The acquisition is expected to be accretive to organic growth of Nestlé in 2021 and accretive to cash earnings by 2022/23. Aimmune’s Palforzia treatment may potentially result in extra annual sales of $1bn later this decade. However, like many biotechnological companies, Aimmune has not been profitable yet and reported a loss of $248M last year. Hence, it remains to be seen whether the significant premium Nestlé paid will be worth it.
