Germany's Merck KGaA is paying a hefty premium to acquire Silence Therapeutics in an all-cash deal for its gene-silencing technology. The question for investors is whether the transaction makes sense.
London-based Silence said Monday that it has agreed to be purchased through a deal with an enterprise value of $1.1 billion and an equity value of roughly $1.3 billion. Through the acquisition, Merck will gain Silence's small interfering RNA, or siRNA. technology, which blocks disease-causing or overactive genes from producing harmful proteins.
Silence investors are set to receive $20 in cash for every American depositary share they own, which equals about $6.67 per regular share. That $20 cash price represents a massive markup: a 130% premium to Silence's closing price on Friday and an 82% premium over its 30-day volume-weighted average price.
Trading in Silence Therapeutics was briefly halted ahead of the announcement. When trading resumed, the biotech's U.S.-listed shares surged nearly 126% to $19.59, pacing toward their largest single-day percentage gain on record. Merck KgAa's Frankfurt-listed shares, meanwhile, fell 1.6%.
For Merck, it's the latest in a steady string of transactions to expand the company's existing portfolio of life sciences tools and specialty therapies. The Silence deal comes on the heels of several other bolt-on acquisitions, including an agreement to purchase Bio-Techne for roughly $11.3 billion in June.
Merck has seen its strongest growth from acquisitions within its healthcare division. The Silence deal marks yet another move to bolster that segment following Merck's acquisition of SpringWorks Therapeutics last year.
Beyond helping the company shift its pipeline toward specialized therapeutic areas with high unmet need, the Silence deal represents a return to form. U.S.-based Merck & Co. divested its entire siRNA business in 2014 to Alnylam Pharmaceuticals, marking its strategic retreat from the space.
While Merck KGaA has previously maintained early-stage research exposure to siRNA and RNA technologies, it hasn't executed a major clinical-stage therapeutic siRNA deal until now. This transaction gives Merck full control over Silence's lead asset, Divesiran -- an siRNA therapy targeting polycythemia vera, a rare, slow-growing cancer in which the bone marrow produces too many red blood cells.
As of the end of June, Merck KGaA held 1.96 billion euros in cash and cash equivalents, alongside 3.12 billion euros in short-term financial assets. While larger transactions beyond that threshold would require the company to tap revolving credit facilities or issue new debt or equity, given its current financial debt of over 12 billion euros, the $1.3 billion deal can be comfortably absorbed.
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