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16 May, 2018 - 13:50 By Tony Quested

Horizon attractive bait for US giants buoyed by Trump tax hauls

Horizon Discovery Cambridge

Seasoned life science investors believe Horizon Discovery, the Cambridge-based gene editing specialist, remains an attractive acquisition target for US companies buoyed by Trump-inspired tax windfalls.

Business Weekly fielded observations after Cambridge neighbour Abcam declined to pursue a formal bid despite submitting a proposal which valued Horizon at 181p per share – an overall £270 million.

Horizon’s share price in the UK originally nosedived following Abcam’s withdrawal from the arena and at one point was as low as 157p – 24p a share behind the gain line. It had recovered at the time of writing on Tuesday to more than 181p but the stock remains volatile.

Abcam sat on its hands after Horizon posted preliminary results for the year to December 21.

One industry observer told me: “Abcam was probably expecting Horizon to be positive EBITDA and closer to profit after tax in FY17 and probably assessed that the FY18 analyst consensus of £60m revenue, £6m EBITDA and break-even at Profit After Tax – leading to a consensus target share price of 236p – was not certain. 

“So, if Abcam had formalised a bid and been forced to go to 220p-240p to secure the deal and Horizon didn’t hit such targets in FY18 an acquisition could have been viewed as shareholder dilutive to Abcam and a drag on its own stock.”

A transatlantic entrepreneur added spice to the pot. “Horizon is in play as an acquisition target as it is inherently undervalued compared to its peers despite growing at a much faster rate. 

“Also relevant US corporates like Thermo, Danaher, Illumina, Millipore and Lonza have all had their balance sheets strengthened to the tune of billions of dollars by Donald Trump’s corporation tax reform.
 
“They will be under pressure to deploy and the UK – with a 30 per cent depreciated currency against the dollar in the  past 24 months – will be fertile ground.” 

Horizon needs to maintain good revenue generation and its upbeat growth graph, to keep US investors interested and will have noted the recent stockmarket announcement that one of the US healthcare funds, Deerfield, had already sold nearly all its holding.  

Abcam, meanwhile, continues to seek strategic acquisition opportunities at the same time as building a new  global headquarters at Cambridge Biomedical  Campus. 

• Image courtesy: Horizon Discovery

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