Why a Swiss bid is weighing on the CSL share price

Posted: 3 December 2021 1:00 pm
News
CSL-shares-03Dec_1800x1000_Finder

Shares in biotech giant CSL are down 4% in the past week alone.

Shares in CSL (ASX: CSL) are among the list of most traded stocks on the ASX on Friday, although the stock has lost ground in the past week.

At the time of writing, CSL shares had dipped below the $300 level and were down nearly 2% at $299.80.

Why has the CSL stock price dipped

CSL shares are trading lower after the biotech giant confirmed that it was in talks for potential offshore M&A activity. It did not identify the takeover target, but media reports linked it to Switzerland-based Vifor Pharma (SWX: VIFN).

CSL, the world's largest maker of blood plasma treatments, has been in talks with the Swiss firm since March, but is now in advanced negotiations and is carrying out due diligence for a deal potentially valued at $10 billion, the reports said.

“There is no certainty that any transaction will result from CSL's consideration of such opportunities and, if any transaction does result, when such a transaction would occur,” CSL said in response to the speculation in a statement to the ASX.

Overnight, the Swiss company’s shares closed nearly 21% higher on the Swiss stock exchange after Vifor said in a statement “it systematically reviews options that can strengthen its market position or accelerate growth”.

Vifor is a global leader in iron deficiency therapies and focuses on nephrology, cardiology and rare diseases, offering a diversified portfolio of prescription and non-prescription drugs.

Equity raising

CSL shares are under pressure on speculation the Australian healthcare firm will be required to raise equity of between $3 billion and $4 billion to fund the deal, if successful.

The biotech giant has been a major beneficiary of the global pandemic, thanks to its partnership with AstraZeneca to produce 50 million doses of the COVID-19 vaccine in Melbourne.

It reported a $2.4 billion annual profit in August despite collections at its key blood products business being impacted by the COVID restrictions globally, and has spare cash at its disposal. However, overseas M&A is typically funded with half the value in equity along with a debt raising.

Jefferies analysts also said in a note that the potential buyout of Vifor would be "a departure in terms of therapeutic area for CSL”, although they said it does tie into the group’s nascent kidney transplant franchise.

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