By: Tomas Ronolski - AllPennyStocks.com News

Friday, July 12, 2013

Biotechnology merger and acquisition deals are maintaining a steady pace in 2013 as bigger pharmas aren’t afraid to spend their cash hordes to bolster pipelines. A location that investors may start honing in on is Japan, where Prime Minister Shinzo Abe has made public his intentions to reform the funding of drug development to emulate the United States National Institute of Health. On Friday, Medicago Inc. (TSX:MDG) (OTCQX:MDCGF) said that Japan’s Mitsubishi Tanabe Pharma Corp. is taking a majority stake in the Quebec City-based, clinical stage biotech company developing vaccines based on proprietary manufacturing technologies and Virus-Like Particles, or VLPs. Per the new definitive agreement, Mitsubishi Tanabe will acquire all of the issued and outstanding shares of Medicago that are not owned by Philip Morris Investments B.V. for $1.16 per share in cash. Including debt Mitsubishi Tanabe will assume the enterprise value of the deal which is $357 million. Philip Morris Investments is an affiliate of Philip Morris International Inc. (NYSE:PM).

Medicago uses its technology to extract VLPs from plants – which mimic authentic viruses, only without the viral genetic material – for use in vaccines for infectious disease worldwide. The acquisition diversifies Mitsubishi Tanabe’s portfolio that is currently focused on the field of autoimmune disease, diabetes and kidney disease, and CNS disease.

Upon closing, Mitsubishi Tanabe, which took a 6 percent stake in Medicago in 2011, will own 60 percent of the company and Philip Morris Investments will own the remaining 40 percent. Both owners will nominate two directors for the board and Mitsubishi Tanabe will appoint the chairman.

The acquisition price represents a 22.1-percent premium to Medicago’s closing price of 95 cents on the Toronto Stock Exchange on July 11. It’s also about a 61 percent premium to the 90-day volume weighted average share price of Toronto-listed shares.

At the start of 2013, shares of MDG were trading at 40 cents.

Medico’s board has approved the deal subsequent to a unanimous recommendation from a special committee of independent directors. The transaction is subject to customary conditions, including shareholder approval, although Medico’s principal shareholder (that holds 38.5 percent of all shares) has agreed to support the deal.

"Mitsubishi Tanabe Pharma, a top 30 global pharmaceutical company, has been a solid and committed partner with the ability to drive Medicago's future growth and success in the development of our best-in-class rapid plant-based vaccines," said Andy Sheldon, president and chief executive at Medicago.

Mitsubishi Tanabe has the right to match any superior offers, should they arise. There is also a break free of $9.25 million for either party.

Shares of MDG gapped ahead in Friday trading to the buyout price and have essentially stayed there all day.

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