GlaxoSmithKline (NYSE: GSK) has taken off the boxing gloves and put on oven mitts. The headlines say the pharma has gone "hostile" in its attempts to takeover Human Genome Sciences (Nasdaq: HGSI), and I guess that's technically true as it announced a plan to take its $13-per-share offer directly to shareholders. But this is one of the nicest hostile takeovers I've ever seen.
No name-calling. No accusations that management is crazy for wanting more. No vice-presidential-debate-style insults a la Illumina (Nasdaq: ILMN) and Roche. I wouldn't be shocked if the tender offer was delivered with chocolate and flowers.
There's a good reason Glaxo is keeping it civil for now; the two are partners on their lupus drug Benlysta. It's hard to dish it out in press releases and then have to go into meeting and make marketing decisions with the company you just insulted.
Human Genome said it'll take a look at the tender offer and let shareholders know their recommendation within 10 business days of when Glaxo makes it official. Considering the biotech rejected a private offer at the same price, it won't take that long. It looks like Human Genome is trying to be just as civil about this.
Being nice is probably the best move at this point, but it's not the best way for Glaxo to win over shareholders. Not that any would tender at this point anyway; they could get a higher value selling on the open market.
It seems like this tender offer is just to make sure everyone knows Glaxo is still interested and perhaps willing to play a little hardball at some point. The pharma says it doesn't plan to enter the bidding process because it doesn't need to do due diligence. That sounds reasonable, but if Human Genome is able to find a higher bidder, it'll need to respond or lose the company.
Most people think it's unlikely that another investor will ride in and save Human Genome, which seems reasonable given that Glaxo controls 50% or more of most of Human Genome's assets. I'd remind investors, though, that Eli Lilly (NYSE: LLY) came in and topped Bristol-Myers Squibb's (NYSE: BMY) bid for Bristol's partner ImClone Systems. Sometimes, half an asset is still worth buying for a desperate pharma.
That said, there's no way to know how this one will play out, which makes it hard to estimate the risk-reward proposition. I think Glaxo probably will offer more to get the deal done, but I'm not sure a small bump in price from here is worth the risk that Glaxo packs up its oven mitts and goes home.
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