BGI-Shenzhen, a Shenzhen, China-based operator of DNA sequencing centers, has struck a deal to acquire Complete Genomics in a transaction valued at roughly $117.6 million. BGI-Shenzhen will pay $3.15 per share in cash for the rights to Mountain View, Calif.-based Complete Genomics.
BGI's board of directors and certain other major stockholders, holding roughly 17.5% of the company's stock combined, support the deal. A majority of Complete Genomics' stock, however, must be tendered for the offer to take effect.
Complete Genomics' largest shareholders as of an April 30 proxy statement were OrbiMed Advisors LLC (13%), Essex Woodland Health Ventures (13%), Prospect Ventures Partners III LP (9.3%), Enterprise Partners (9.1%), Highland Capital Management LP (8.1%) and Stephens Investment Management LLC (5.2%).
BGI-Shenzhen expects to complete the buyout in early 2013.
While the deal represents a 54% premium to the $2.04 per share price Complete Genomics traded at June 4, it is just a 13 cents per share bump from the company's $3.02 per share close Monday, Sept. 17, (the stock traded up slightly to $3.06 per share midday Tuesday).
In addition, BGI is buying Complete Genomics at roughly one-quarter of the price it initially hoped to fetch when it first planned its initial public offering in 2010 -- and close to just one-sixth of value the stock achieved in mid-2011.
Complete Genomics first filed for an IPO in July 2010, seeking to raise up to $86.55 million after losing $95.5 million since its inception in 2005. Three months later, in October 2010, it cut its proposed cash raise to $78 million and priced its shares at between $12 and $14 apiece. By the time Complete Genomics went public a month later during a tough IPO market for life sciences companies, it raised just $54 million by offering 6 million shares at $9 apiece.
Though Complete Genomics' shares spiked in the middle of 2011, closing as high $17.42 per share on June 2, 2011, its value has since slowly eroded. It was only a year later, on June 5, with its share price at $2.18, that Complete Genomics hired Jefferies & Co. to help with a strategic review and potentially a sale, citing a need to reduce its cash burn. The company wiped out 55 jobs as part of the restructuring.
Complete Genomics posted a $72.3 million net loss in 2011 despite bringing in $19.34 million in revenue, by far its highest total to date. Complete Genetics began generating revenue in 2009 when it posted $623,000 on its top line. The company has been burning through roughly $30 million in cash per quarter and said in its latest annual report on March 9 that there was substantial doubt about its ability to continue as a going concern.
BGI-Shenzhen, however, believes that Complete Genomics' sequencing capabilities will complement its own operations. The target will operate as a separate subsidiary of BGI-Shenzhen.
"Complete [Genomics] has developed a proprietary whole human genome sequencing technology that, together with other sequencing platforms used by BGI [Shenzhen], will fit well with our research and business requirements and position Complete to become an even more successful global innovator," BGI-Shenzhen chief executive Wang Jun said in a statement.
Complete Genomics is the developer of a low-cost DNA sequencing platform, offering human genome sequencing and analysis as an outsourced service. The company sequenced more than 3,000 whole human genomes in 2011. Genome sequencing is a tool doctors and hospitals use to help in disease prevention and treatment.
Paul Scrivano and Wendy Pan of O'Melveny & Myers LLP provided BGI-Shenzhen with legal counsel. Citigroup Inc.'s Ben Carpenter was the buyer's financial adviser.
Complete Genomics turned to Alan Mendelson, Luke Bergstrom, Kirt Switzer, Joshua Holian, John Kenney, Judith Hasko, Patrick Gibbs and Rowland Cheng of Latham & Watkins LLP for legal counsel.
Real LeClerc of Jefferies provided the seller with financial advice.
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