Why is the CSL share price under pressure?

Posted: 4 March 2022 12:49 pm
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Shares in biotech giant CSL have lost more than 15% of their value in the last 6 months and continued its sell-off today.

Shares in biotech giant CSL (ASX: CSL) are among the most traded stocks on the ASX on Friday. The stock, which has been under pressure in recent months, was down another 1.2% to $254.31 at the time of writing.

Why are CSL shares trading lower?

The drop in CSL shares comes even as the biotech giant provided an update on its mammoth $16.4 billion takeover of Switzerland-based Vifor Pharma (SWX: VIFN) late on Thursday.

CSL said 74% of Vifor shares have been tendered under its public tender offer for Vifor. While this is short of its original 80% target, the company declared the offer a success.

"CSL welcomes the strong support it has received from Vifor shareholders for the acquisition and now plans to waive the original 80% acceptance rate condition," it said in a statement to the ASX. "Following this, a tender period for subsequent acceptance of the offer will commence on 9 March 2022 and run through until 22 March 2022."

The stock has remained under pressure since December when CSL announced a massive $7 billion equity raising to part fund the Vifor acquisition, issuing shares at a hefty discount to the then market price.

Analysts have been cautious on the CSL stock in recent weeks as well, after the company revealed transaction costs of between US$90 million and US$110 million related to the acquisition at its half year results in February.

Earnings accretive

Despite the equity dilution weighing on the CSL stock price, the Vifor deal is still expected to be transformational for CSL in the medium term.

CSL says the merger is expected to be immediately earnings per share accretive. Analysts at Citi have previously estimated the acquisition to be ~9% accretive to NPATA per share.

Vifor is a global leader in iron deficiency therapies and also focuses on nephrology, cardiology and rare diseases. That would help diversify the product portfolio of CSL, which is currently the world's largest maker of blood plasma treatments and gets more than three-fourths of its revenue from the segment.

"The regulatory approval process for the acquisition is on track and CSL remains confident that the remaining conditions will be satisfied and the transaction completed by mid-2022," CSL said in its statement on Thursday.

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