Gilead an acquisition target? Deep pockets required

Jefferies’ Michael Yee says investors believe that Gilead Sciences (GILD +0.6%) is an acquisition target considering its near-term share performance (at the same level as three years ago with some volatility thrown in) and tepid growth prospects (little or no topline increase expected this year).

He equates its current situation with Allergan (AGN +2%), acquired by AbbVie (ABBV +5.2%) for $63B and Celgene (CELG), acquired by Bristol-Myers Squibb (BMY -1.6%) for $74B, albeit it is not an “obvious” takeover target.

Any potential suitor will need deep pockets. For comparison purposes, AbbVie paid a 2.8x multiple of Allergan’s trailing 12-month revenues while BMY paid 4.4x for Celgene. GILD’s current market cap is ~$90B or 4.0x times its most recent 12-month revenues. Since management is unlikely to embrace a no-premium bid, an offer would probably need to be $100B – 125B, an amount very few companies could digest.

https://seekingalpha.com/news/3539763-gilead-acquisition-target-deep-pockets-required