Analysts welcomed Roche’s $4.8 billion takeover of Spark Therapeutics because of Spark’s novel gene therapy platform and potential enhancements in hemophilia and eye disease. But the acquisition didn't come easy: The deal proxy shows the company had to fight through a bidding war to land its target.
It all started last May, when Spark set out looking for a co-development and co-promotion partner for its hemophilia A programs. And the companies wouldn't ink the M&A agreement until a thrilling Friday night in February that saw Roche jack up its proposal from the original per-share price of $70 to $114.50.
Here’s how the journey played out, according to Spark’s filing with the Securities and Exchange Commission.
Spark first contacted Roche and two other companies (Party A and Party B) for a potential hemophilia A partnership that would have covered phase 3-ready gene therapy SPK-8011 and phase 1/2 candidate SPK-8016. But Roche was apparently more interested in buying out the gene therapy specialist instead.
On Dec. 14, Roche offered Spark $70 a share, days after Roche CEO Severin Schwan told Spark helmsman Jeffrey Marrazzo of his company's interest in an acquisition. With that offer, it became a “go big or go home” scenario for Roche, as Spark's leaders soon decided at a board meeting that the Swiss drugmaker should be excluded from partnership talks because it had changed its intentions.
Spark didn’t want to jeopardize its collaboration discussions with Party B, as it was the leading candidate in that process. It also didn't think Party B would be that interested in other parts of its business, and that Party B might not be able to “consummate a transaction of this size.” So it kept Party B out of the loop and instead reached out to Party A and another global biopharma firm, Party C, gauging their interest in a buyout.
Party B would later offer up a hemophilia A global collaboration deal with $450 million in upfront payments, plus potential milestones and royalties, as well as shared development expenses.
As for Roche’s first offer, the board ruled that it was “insufficient” and declined Roche access to due diligence materials. The minimum price Spark would consider at the time? Well into the $80s, in Spark’s own words.
A competition was coming. On Jan. 22 and Jan. 23, both Party C and Party A responded that they were interested in exploring a potential acquisition, knowing that Spark had received an unsolicited offer.
Spark, however, did hold an all-day presentation about the company with Roche. After that, Roche was slightly moved, increasing its proposal to $73 per share. That price was still well below Spark’s expectation, though—and that’s what Spark’s financial adviser relayed to Roche on Jan. 30.
In early February, Party C came up with its first offer, $75, while Party A decided to drop out. Both Roche and Party C indicated that they could raise their offers after due diligence. Spark budged, allowing both access for their separate investigations.
After a few rounds of communications that didn’t drum up new offers, things started heating up on Feb. 22 in what would become a whirlwind of bids.
At around noon Eastern Time that day—a deadline previously set by Spark—both Roche and Party C returned with their new offers. Party C put forward $84 and eagerly told Spark’s financial adviser prior to the submission that it could go even higher. Roche, though, offered $91 and said that represented its best and final proposal.
Spark’s board then set a new deadline of 6 p.m. that same day, telling both that it intended to make a decision “promptly” on the condition that the highest final bid was at least $2 per share higher than the other one.
In just a few hours, the two returned. Roche: $114.50 per share. Party C: $105 per share. Roche won. And that price represented a 122% premium to Spark’s closing price that day. That evening, Spark’s board approved the deal, and the merger agreement was executed. And before the market opened on Feb. 25, the pair made the deal public.
Going after Spark at that high a premium shows just how badly Roche wanted the company—especially considering how restrained it's been at the M&A table in recent years. But the company can also be dogged in its pursuit when it sets its sights on a target. Back in 2007, it even fought Ventana Medical Systems in court over the latter's use of anti-takeover statutes in an attempt to block Roche's bid. Roche eventually prevailed, buying Ventana for $3.4 billion after raising its bid from $75 per share to $89.50.