Abcam ends interest in Horizon Discovery after £270m bid rejected

Horizon board said offer undervalued firm and it can see little “strategic rationale in combining” the companies

Abcam has ended its interest in acquiring Horizon Discovery.

The Cambridge protein research tool company, which had a £270million bid rejected, confirmed it was stepping away from the offer after Horizon’s board issued fresh results and a statement saying it could see “little strategic rationale to combining the two companies”.

Horizon, the gene-editing and gene modulation firm based in Waterbeach, said the offer made last month had “fundamentally” undervalued the company.

Announcing its new CEO Terry Pizzie on Tuesday, Horizon released preliminary results for 2017, showing revenue growth up 52 per cent to £36.5million and its margin rising to 62 per cent. Despite this progress, it made an overall pre-tax loss of £14.3 million, compared to £12.5million in 2016. Horizon said this was due to research and development costs rising to £11.9million from £6.2 million plus higher sales, marketing and distribution costs.

Based on the 2018 revenue forecast of £60million, Horizon said Abcam’s “unsolicited proposal” had valued the firm “at a multiple of four times revenue” whereas the “median 2018 trading revenue multiple for Horizon’s key peers” was 8.4 times revenue.

A statement from Abcam issued to the London Stock Exchange on Wednesday (May 9) read: “On 2 May 2018, Abcam announced that it had made a proposal in relation to a possible offer for Horizon Discovery at 181 pence per share. This reflected Abcam’s strong interest in pursuing strategic expansion in the gene editing market, which the directors of Abcam believe to be a highly complementary adjacency to Abcam’s existing business. The proposal was rejected by the board of Horizon Discovery.

“Abcam continues to execute on its vision to be the most influential life science company for researchers worldwide, and remains committed to expanding its reach and influence globally. However, it has always been Abcam’s intention to remain disciplined about value whilst working towards a transaction with the recommendation of the board of Horizon Discovery.

“On 8 May 2018, Horizon Discovery published its preliminary results for the year ended 31 December 2017. Having considered those results and Horizon Discovery’s statement on 2 May 2018 regarding the board of Horizon Discovery’s view that there is little strategic rationale to combining the two companies, Abcam confirms that it does not intend to make an offer for Horizon Discovery.”

Abcam, which is building its new HQ on Cambridge Biomedical Campus, will only reconsider its position if another offer is made for Horizon, there is a “material change” in circumstances or the Horizon board takes a different view.

Horizon responded by reiterating its belief in the “strong outlook for the company’s future performance”.

Newly-appointed CEO Mr Pizzie, who was promoted from within following the departure of Dr Darrin Disley in February, said: “The board notes the announcement by Abcam plc that they do not intend to make an offer for the business. As stated in our full year results, we have made a solid start to trading for 2018 in line with board expectations and I am now looking forward to leading the company through its next phase of growth.”

News of the Abcam offer last Wednesday caused Horizon’s share price to soar from 144p the previous day to 192p. It plunged to 155p following news that Abcam would not pursue a hostile takeover, but rallied somewhat.

Abcam’s decision brings an end to a move that would have combined two of the Cambridge cluster’s life science heavyweights.