By Bio-IT World Staff
September 17, 2012 | In a stunning move for the genomics industry, two leading DNA sequencing service providers – China’s BGI and Complete Genomics – have entered into a definitive merger agreement.
In a prospective deal worth some $117 million, BGI Shenzhen has tendered an offer of $3.15/share for all of Complete’s outstanding shares. The price is a 54% premium on Complete’s stock price on June 4, 2012 – the last day before Complete’s management announced it was exploring strategic business alternatives in consultation with Jefferies & Company -- and an 18% premium on the stock’s closing price last week.
In pre-market trading, Complete’s stock was up more than 10% to more than $3/share on the merger news. However, it is a far cry from the $17 peak stock price the company enjoyed at the end of 2010.
BGI's CEO Dr. Wang Jun commented: “Complete has developed a proprietary whole human genome sequencing technology that, together with other sequencing platforms used by BGI, will fit well with our research and business requirements and position Complete to become an even more successful global innovator. We look forward to growing the business to improve medical research and, when clinical services are provided, support better disease diagnosis with tools that can be used by doctors and hospitals to treat their patients.”
Complete Genomics CEO Clifford Reid added: “We engaged in a thorough review of a broad set of possible alternatives for the company, and we believe the transaction with BGI represents the best outcome for our stockholders, offering them liquidity and a premium value… The combination of the companies' resources provides an opportunity to accelerate our vision of providing researchers and physicians with the genomic information needed to prevent, diagnose, and treat cancers and other genetic diseases.”
Goldman Sachs analyst Isaac Ro issued a note on the deal. The Complete acquisition accelerates BGI’s search for a U.S. sequencing base, says Ro, “giving BGI an immediate infrastructure and service offering that will complement the facilities in China.”
Ro sees the merger having little immediate impact on Illumina’s business. “Our recent checks have suggested that BGI has been running its [Illumina] lab well below full capacity, suggesting the incremental impact to demand will not be material even though BGI represents a sizable percentage of the installed base.”
He adds that visits to BGI “have shown significant infrastructure tied to [Illumina] technology (informatics and workflow) that we don't believe will be shut down as a result of this deal. Rather, we expect that BGI will continue to run their existing [Illumina] labs in China and the [Complete Genomics] facility in San Francisco together.”
BGI and Complete Genomics have emerged as the two of the leading providers of genome sequencing services to academia and industry. In addition, Illumina offers an extensive network of genome sequencing contractors, and many other companies and service providers offer various sequencing capabilities, including Expression Analysis, GATC Biotech, Seqwright, Beckman Coulter and Perkin Elmer. Recently, Complete published details of its Long Fragment Read technology, offering unparalleled sequencing accuracy. While Complete has signaled a strong move into the clinical sequencing market, the company was struggling to sustain a profitable business, and this summer engaged Jefferies & Company to advise it on strategic alternatives.
BGI offers a large a la carte menu of sequencing services, including exome and transcriptome sequencing in addition to whole-genome sequencing, on essentially any organism. The organization hosts most of its sequencing operation in Hong Kong, which facilitates the transfer of samples and results. By contrast, from its launch, Complete Genomics elected to specialize in whole-genome sequencing of human samples.
BGI Americas, the U.S.-based subsidiary of BGI, will launch a tender offer to purchase all outstanding shares of Complete’s common stock. The proposed merger has been unanimously approved by Complete's board of directors. Complete will also be provided with up to $30 million in bridge financing for its operations following the signing of the merger agreement.
All of Complete's directors and executive officers as well as certain other major stockholders, who collectively own approximately 17.5% of the outstanding common stock of Complete, have agreed to tender all of their shares pursuant to the tender offer. The merger is expected to be wrapped up in early 2013, although it is contingent on the approval of certain governmental authorities in China, as well as the satisfaction of other customary conditions.