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Complete Genomics, BGI Agree to $117.6M Merger

NEW YORK (GenomeWeb News) – More than three months after it began a review of its strategic alternatives, Complete Genomics along with BGI-Shenzhen today announced a definitive merger agreement in a deal estimated at about $117.6 million.

Under the terms of the merger, BGI will pay $3.15 per share in cash for each share of Mountain View, Calif.-based Complete Genomics. The price represents a 54 percent premium to the $2.04 closing price of Complete Genomics' stock on June 4, the last trading day before it announced its review of strategic alternatives. Complete Genomics' shares closed Friday at $2.67 on the Nasdaq and were up 14 percent at $3.06 this morning.

Complete Genomics will continue to operate as a separate company and remain in Mountain View, the firms said, adding that the combination of the businesses will bring together "complementary scientific and technological expertise and R&D capabilities."

Complete Genomics' board has unanimously recommended its shareholders accept the offer and tender their shares, the companies said.

In addition to the merger agreement, Complete Genomics and an affiliate of BGI have reached a deal to provide Complete Genomics with $30 million in bridge financing following the signing of the merger agreement. The merger is anticipated to be completed in early 2013.

"With the assistance of our advisors, we engaged in a thorough review of a broad set of possible alternatives for the company, and we believe the transaction with BGI represents the best outcome for our stockholders, offering them liquidity and a premium value," Clifford Reid, chairman and CEO of Complete Genomics, said in a statement. "The combination of the companies' resources provides an opportunity to accelerate our vision of providing researchers and physicians with the genomic information needed to prevent, diagnose, and treat cancers, and other genetic diseases."

Wang Jun, CEO of BGI, added that Complete Genomics' technology "together with other sequencing platforms used by BGI, will fit well with our research and business requirements and position Complete [Genomics] to become an even more successful global innovator.

"We look forward to growing the business to improve medical research and, when clinical services are provided, support better disease diagnosis with tools that can be used by doctors and hospitals to treat their patients," he said.

Today's announcement follows Complete Genomics' review of its business options, a process that included 55 layoffs. Founded in 2005, the firm provides whole human genome sequencing services. For the second quarter, it reported a net loss of $18.8 million, or $.55 per share, on revenues of $8.7 million.

In a research note this morning Amanda Murphy, an analyst with William Blair & Co., said that the deal "provides more support for the importance of whole-genome sequencing for humans. … Ultimately, this bodes well for providers working to enable whole-genome sequencing, including those manufacturing sequencing instruments," such as Illumina and Life Technologies, " and those focused on improving the front end and back end of the workflow," such as Fluidigm, Ingenuity, and RainDance Technologies.

Isaac Ro of Goldman Sachs added that the deal accelerates BGI's expansion into the US and gives it "an immediate infrastructure and service offering that will complement the facilities in China."

BGI was founded in 1999, and in 2010 it received $1.5 billion in funding from the China Development Bank to expand its operations, Ro noted.

BGI also provides next-generation sequencing services and uses multiple platforms. The deal, if completed, could pressure those companies, "as BGI strengthens its service-only offering and reduces dependency on Illumina/Life Technologies," Peter Lawson, an analyst with Mizuho Securities, said in a research note. "With the acquisition we could see a portion of sequencing work move from existing and future external platforms onto Complete Genomics technology."

Jefferies & Co. advised Complete Genomics on the transaction, while Citigroup advised BGI.