The merger agreement will see Novartis pay approximately $600 million more than its original bid. Chiron’s board had rejected the initial offer at the beginning of September having deemed the bid to be inadequate. Novartis, which already owns 42% of Chiron, raised its cash bid for the remaining 58% to $45 a share, $5 a share more than its first offer.
Novartis’ chief executive Daniel Vasella has already indicated his intention to bring about a change in fortunes for Chiron. The company was forced to halt production of its flu vaccines, Begrivac and Fluvirin, at two of its factories in Germany and the UK, amid contamination concerns last year.
Novartis believes Chiron will give it an edge in the fast-growing vaccines market, which is expected to experience accelerating growth, more than doubling in sales in the next five years to over $20 billion in 2009 from about $9.6 billion in 2004, according to industry surveys.
In the past few years, the perception of the vaccines market has been changing drastically. Scientific and technological advances have allowed for the development of safe and efficacious vaccines, and it is increasingly appreciated that effective prevention is preferable to curative therapy. In addition, scares of a bird flu epidemic have sparked vaccine stockpiling activity on a global scale, which has further fuelled vaccine pipeline activity.
Chiron, which has approximately 5,400 associates worldwide and is comprised of activities in vaccines, blood testing and biopharmaceuticals, had overall sales of $1.7 billion in 2004.