Shares of Sagent Pharmaceuticals soared more than 39 percent in early trading Monday after the generic drugmaker agreed to be acquired by Japan's Nichi-Iko Pharmaceutical in a deal valued at $736 million.
In an all-cash tender offer, Nichi-Iko will pay $21.75 a share for Sagent, a price that is 40.3 percent above the stock's Friday close of $15.50. The offer has been unanimously approved by the boards of Nichi-Iko and Sagent.
The companies said the merger will bring together two generic drugmakers with complementary portfolios, and boost Nichi-Iko's U.S. business and increase its presence in injectable drugs.
"The company has a highly robust sales network, significant global relationships through its unique partner network, and an attractive portfolio of 55 products primarily in oncology, anti-infective, and critical care, of which 30 [percent] have a No. 1 or No. 2 market share," Yuichi Tamura, president and CEO of Nichi-Iko, said in a press release.
In January, Sagent was considering a sale of the company, Reuters reported.
"We are confident that Nichi-Iko is the ideal partner to help us push forward into our next stage of growth and solidify our position as a leading provider of affordable pharmaceuticals to the hospital and clinic market," Allan Oberman, CEO of Sagent Pharmaceuticals, said, in the release.
The tender offer will begin in 15 business days after the deal is signed and remain open for at least 20 business days. If a majority of Sagent shares are tendered, there will be a second-step where all outstanding shares of Sagent's will be purchased for the same amount.
Vivo Capital, which owns about 19.8 percent of Sagent, has agreed to tender its stock.
The deal is expected to close in the second quarter of Nichi-Iko's fiscal year ending March 2017, and it isn't subject to any financing conditions.
Prior to the offer, Sagent's stock was down more than 2 percent this year.
SGNT 2016 Chart
Nichi-Iko's stock has plummeted this year, falling 28 percent.
Nichi-Iko 2016 Chart