What happened
Shares of Intercept Pharmaceuticals (ICPT) are seeing explosive gains in Tuesday's trading following an announcement that the company is on track to be acquired by Alfasigma, a private Italian pharmaceuticals company. Intercept's share price was up 79% as of 1 p.m. ET today, according to data from S&P Global Market Intelligence.
Alfasigma published a press release before the market opened today announcing that it had reached an agreement to acquire Intercept at a price of $19 per share. Before trading began today, the proposed acquisition price represented an 82% premium compared to Intercept's valuation.
So what
Intercept is now trading at roughly $18.70 per share, which suggests that investors believe there's a very good chance that the buyout will be completed. Per the press release, the deal is expected to close before the end of this year. At current prices, Intercept offers just 1.6% upside if the deal is completed.
Now what
With the combination, Alfasigma looks to expand its treatment portfolio in gastroenterology and hepatology and exposure to the U.S. market. There's very little chance of an antitrust challenge here, so it looks like the acquisition will almost certainly be completed. On the other hand, there's no sense in getting greedy.
If you don't already own Intercept stock, now is probably not the time to buy. The company is trading just a sliver below its proposed acquisition price. Alternatively, now looks like a good time for shareholders to take profits. It's highly likely that the buyout will be completed, and investors can capitalize on a big valuation pop without taking on outsize risk on the slim chance that the deal collapses.
