Gilead Will Obtain No “Fairness Opinion” From a Banker, As A Condition To the Pharmasset Deal


When Merck (on an opinion from JP Morgan) busted-up/bought Schering-Plough, and when Pfizer (also on an opinion from JP Morgan) bought Wyeth, each of the parties — the acquiror, and the target — in each deal obtained written fairness opinion(s) — that the deals were fair from a financial point of view, from a reputable investment bank.

Not so, early this morning, in the case of Gilead — as it announced a purchase of Pharmasset. Let’s puzzle as to why that might be so, shall we?

Only Pharmasset (i.e., the target), per Section 5.3(a), on page 46 of the SEC-filed merger agreement, is slated to receive such a so-called fairness opinion. Interesting. The opinion will be given by Morgan Stanley, by the way — the same firm that gave Schering-Plough its fairness opinion, in the Merck bust-up (Goldman Sachs & Co. also gave Schering-Plough an opinion, BTW).

I guess when you’re paying about one-third of your market cap, in cash, today, for what many analysts estimate might be around $3 billion a year by 2018, and beyond (i.e., more than six years away — and all subject to FDA, NICE and EMEA approvals). . . it gets tough to find a banker that will say such a deal is fair, from a financial point of view, to the holders of Gilead common stock.

I am just sayin’. . . Wow.

[That might be some evidence — should dissident shareholders of Gilead decide that they are taking a bath here. . . their own board didn’t procure a fairness opinion, to protect them (and the board, itself). Wild.]

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