NEW YORK (CNNfn) - Pharmacia & Upjohn Inc. filled the prescription for acquisition Tuesday as the drugmaker said it agreed to acquire biotech company Sugen in a $650 million deal.
South San Francisco, Calif.-based Sugen is described as a leader in developing new therapeutic approaches to cancer and other diseases through its development of small molecule inhibitors. The company has three anti-cancer drugs in development.
Under the terms of the agreement, each of about 23.5 million shares of Sugen (SUGN) stock will be exchanged for about $31 worth of Pharmacia & Upjohn (PNU) stock, so long as the price of Pharmacia stock is between $60.16 and $49.22 at the close of the transaction.
The Bridgewater, NJ-based Pharmacia closed up 1-3/8 Tuesday at about 54-11/16. Sugen was down ½ at 22-1/2.
In no event will Sugen shareholders receive less than .515 share of Pharmacia common stock, no more than .630 share of Pharmacia stock for each share of Sugen common stock.
The exchange ratio will be based on the average price of P&U stock prior to closing. The transaction will be accounted for as a pooling of interests and will qualify as a tax-free exchange.
The boards of both companies have approved the deal, valued at about $650 million on a net basis, and it is subject to approval by Sugen's shareholders and customary regulatory approvals.
Under certain circumstances, if the merger agreement is terminated, Pharmacia has the right to purchase 19.9 percent of Sugen's common stock and has the right to a fee of $17 million.