Bristol-Myers Squibb Co. became the latest company to jockey for position in the increasingly competitive hepatitis C market when it agreed Saturday to purchase Inhibitex Inc. and its flagship program for the disorder in a $2.5 billion transaction.

Bristol-Myers will pay $26 per share in cash via a tender offer, and $2.5 billion in total, for Alpharetta, Ga.-based Inhibitex. The offer is more than double Inhibitex's $9.87 per share closing price Friday.

Both companies' boards of directors have approved the deal. Inhibitex's board has agreed to recommend it to its shareholders, while stockholders holding 17% of Inhibitex have pledged to tender their shares.

Bristol-Myers expects the deal to be dilutive to its earnings through 2016, depressing earnings per share by 4 cents in 2012 and about 5 cents in 2013. The offer is conditional on Bristol-Myers' gaining at least a simple majority of Inhibitex's fully diluted stock and contains a provision whereby Inhibitex has agreed not to solicit any competing bids.

Bristol-Myers will finance the buyout with cash on hand.

In acquiring Inhibitex, the New York buyer is staking its claim in the hepatitis C, or HCV, market, which has been one of the hottest in the sector over the past year. Inhibitex's flagship compound is INX-189, an oral nucleotide polymerase (NS5B) inhibitor that is currently in Phase 2 trials. Bristol-Myers claimed in its statement that such nucleotides are emerging as an "important class of antivirals that may play a critical role as the backbone" for future antiviral-only HCV treatments.

HCV is historically treated with injectable interferon-based therapies, which can have substantial side effects.

The deal brings to mind a similar bet made by Gilead Sciences Inc. less than two months ago when it paid $10.4 billion -- a 90% premium -- for Pharmasset Inc. and its late-stage HCV compound, PSI-7977. Much like Gilead, Bristol-Myers is also gambling on a midstage product with plenty of promise.

"There is significant unmet medical need in hepatitis C," said Bristol-Myers CEO Lamberto Andreotti in the statement, noting that the Inhibitex buy adds to the company's portfolio of investigational medicines for HCV. "This acquisition represents an important investment in the long-term growth of the company."

Inhibitex develops products to prevent and treat infectious diseases. The company has three products in Phase 2 trials: INX-189; FV-100, a nucleoside inhibitor used to treat pain associated with shingles; and Aurexis, a monoclonal antibody being developed for the treatment of staphylococcus aureus bloodstream infections. Inhibitex also has certain other HCV nucleotide inhibitors in preclinical development. The company, which has yet to bring any products to market, suffered a $22.67 million net loss in 2010.

The acquisition is Bristol-Myers' first since it agreed to pay as much as $475 million for San Diego-based Amira Pharmaceuticals Inc. in July.

David Fox, Daniel Wolf, David Feirstein, Joshua Zachariah and Charles Fellers of Kirkland & Ellis LLP are Bristol-Myers' legal counsel. Citigroup Inc. is its financial adviser.

David Rosenthal, Richard Goldberg, Paul Denis, Thomas Rayski and Daniel Dunn of Dechert LLP are providing Inhibitex with legal advice. Credit Suisse Securities (USA) LLC is the target's financial adviser.