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Complete Genomics Inc. to be acquired by Chinese firm BGI-Shenzhen for $117.6 million
MOUNTAIN VIEW, Calif. and SHENZHEN, China—Complete Genomics Inc., a whole-human genomic sequencing company, and BGI-Shenzhen, a leading international genomics company based in China, announced in mid-September that they had entered into a definitive merger agreement. Based on the number of fully diluted outstanding shares of Complete Genomics, the aggregate value of the transaction is approximately $117.6 million. In addition, Complete Genomics and an affiliate of BGI have entered into an agreement pursuant to which Complete Genomics will be provided with as much as $30 million in bridge financing for its operations following the signing of the merger agreement.
Complete provides whole-human genome sequencing that is one day expected to become a mainstay of disease diagnosis and treatment, while BGI operates international genome sequencing centers that support genetic research into agriculture, animals and humans. The combination of the two companies is expected to bring together complementary scientific and technological expertise and R&D capabilities, but the companies will not merge into one unit. Instead, Complete Genomics will continue to be operated as a subsidiary company and its headquarters and operations will remain in Mountain View, Calif.
"Complete has developed a proprietary whole human genome sequencing technology that, together with other sequencing platforms used by BGI, will fit well with our research and business requirements and position Complete to become an even more successful global innovator," said BGI's CEO, Dr. Wang Jun. "We look forward to growing the business to improve medical research and, when clinical services are provided, support better disease diagnosis with tools that can be used by doctors and hospitals to treat their patients."
The acquisition announcement comes a little more than three months after Complete Genomics said it was restructuring—a process that resulted in more than 50 layoffs—and doing a review of strategic alternatives that, at the time, ran the gamut from a merger to a business combination to an equity investment to a sale.
"With the assistance of our advisors, we engaged in a thorough review of a broad set of possible alternatives for the company, and we believe the transaction with BGI represents the best outcome for our stockholders, offering them liquidity and a premium value," said Dr. Clifford Reid, chairman and CEO of Complete Genomics. "In addition, it offers a great outcome for our customers, present and future. The combination of the companies' resources provides an opportunity to accelerate our vision of providing researchers and physicians with the genomic information needed to prevent, diagnose, and treat cancers and other genetic diseases."
Complete Genomics' board of directors has unanimously recommended that stockholders accept the offer and tender their shares. BGI's acquisition offer represents approximately a 54-percent premium to the $2.04 closing price per share of Complete common stock on June 4, the last trading day prior to the California company's announcement that it was undertaking an evaluation of strategic alternatives.
BGI had already been on the lookout for a U.S. sequencing base before Complete Genomics essentially put itself up on the auction block, but with this acquisition, that goal to get a foothold in the United States is accelerated, wrote Isaac Ro, a Goldman Sachs analyst, in a note about the deal, "giving BGI an immediate infrastructure and service offering that will complement the facilities in China."
Ro noted that BGI is tied significantly in terms of infrastructure to informatics and workflow technology from Illumina Inc.—a competitor to Complete Genomics—but he doesn't predict that BGI will shut down existing Illumina labs in China but rather run them in parallel with the Complete Genomics facility in California and its rival technology.
On the other hand, reporting by Bloomberg about the deal points out that while Complete Genomics's sequencing technology gives results slower than that of Illumina, studies have shown that the it is more accurate than Illumina's technology, and some market-watchers believe BGI would like to have some leverage over other vendors—leverage that having its own in-house sequencing platform might provide.