The net proceeds of the proposed Placing are intended to be used: (i) to fund upfront and near-term payments in respect of the Company's global development and commercialisation collaboration agreement with Daiichi Sankyo Company Limited (Daiichi Sankyo) for trastuzumab deruxtecan (DS-8201) announced by the Company today (the Transaction); (ii) for the repayment of the Company's $1bn, 1.95% notes due on 18 September 2019; and (iii) for general corporate purposes, to improve the Company's overall balance-sheet strength and liquidity.
The net impact of the Transaction and the Placing is expected to be neutral to AstraZeneca's Core Earnings Per Share (EPS) in 2019, growing Core EPS accretion from 2020 to a significant contribution in 2023. AstraZeneca reconfirms its 2019 Product Sales and Core EPS guidance at constant exchange rates post-placing and transaction and confirms there is no change to the Company's progressive dividend policy.
Further details in respect of the Transaction were announced today and can be found on https://www.astrazeneca.com/investor-relations/stock-exchange-announcements.html. The Transaction will become effective on 29 March 2019. The Placing is not conditional on completion of the Transaction.
Background
The collaboration with Daiichi Sankyo is expected to reinforce AstraZeneca's science-led strategy in Oncology that is based on four key scientific platforms: tumour drivers & resistance, DNA damage response, Immuno-Oncology and antibody drug conjugates. It is also consistent with the Company's financial objectives and investment priorities.
A total $1.35bn of the net Placing Proceeds will be used to pay the initial transaction consideration to Daiichi Sankyo, comprising $675m upfront and a further payment of $675m in 12 months' time. In addition, it is expected to fund around $1bn of approval and sales-related contingent milestone payments of the Transaction that are projected to be incurred from 2020 to 2022.
The Company is committed to maintaining its strong, investment-grade credit ratings and the Transaction and the Placing have been structured as part of its deleveraging priority. As such, the remainder of the net Placing Proceeds will be used to reduce the Company's net indebtedness, including the provision of funds to meet the upcoming maturity of the Company's $1bn, 1.95% notes due on 18 September 2019. The remaining net Placing Proceeds will be held as cash and used for general corporate purposes.
The Company has consulted with a number of its leading shareholders regarding the rationale for the Placing and its non-pre-emptive nature ahead of this announcement. The proposed issue and allotment of the Placing Shares will be within the existing shareholder authorities granted to the Company at its annual general meeting held on 18 May 2018.
Financial considerations
The Board's general capital-allocation policies remain unchanged, striking a balance between the interests of the business, financial creditors and the Company's shareholders. After providing for investment in the business, supporting the progressive dividend policy and maintaining a strong, investment-grade credit rating, the Board will review potential investment in immediately earnings-accretive, value-enhancing opportunities.
The Core EPS impact of the Transaction is expected to be neutral in 2019, growing Core EPS accretion from 2020 to a significant contribution in 2023. As such, the Company considers it appropriate to make an exception to the aforementioned 'immediately-accretive' capital-allocation policy. As a result, the Transaction and the Placing do not affect the Company's financial guidance for 2019. Payments from Daiichi Sankyo will be recorded as Collaboration Revenue (formerly Externalisation Revenue) in the Company's financial statements.
Details of the Placing
Goldman Sachs International (Goldman Sachs) and Morgan Stanley & Co. International plc
(Morgan Stanley) are acting as joint global coordinators and joint bookrunners on behalf of the Company in connection with the Placing. Ondra LLP is acting as financial adviser to AstraZeneca in connection with the Placing.
The Placing is subject to the terms and conditions set out in the Appendix. The Bookrunners will today commence a book-building process in respect of the Placing (the Bookbuilding Process). The price per ordinary share at which the Placing Shares are to be placed (the Placing Price) will be decided at the close of the Bookbuilding Process. The book will open with immediate effect following publication of this Announcement. The timing of the closing of the book, pricing and allocations are at the joint discretion of the Bookrunners and the Company. Details of the Placing Price and the number of Placing Shares will be announced as soon as practicable after the close of the Bookbuilding Process.
The Placing Shares, when issued, will be fully paid and will rank pari passu in all respects with the existing ordinary shares of the Company, including the right to receive all dividends and other distributions declared, made or paid after the date of issue.
Application will be made for the Placing Shares to be admitted to the premium listing segment of the Official List of the Financial Conduct Authority and to be admitted to trading on the main market for listed securities of the London Stock Exchange plc (together, Admission). Settlement for the Placing Shares and Admission is expected to take place on or around 8am on 2 April 2019. The Placing is conditional, among other things, upon Admission becoming effective. The Placing is also conditional upon the placing agreement, which was entered into between the Company and the Bookrunners shortly before this announcement (the Placing Agreement) not being terminated. The Appendix sets out further information relating to the Bookbuilding Process and the terms and conditions applicable to the Placing.
This Announcement should be read in its entirety. In particular, the information provided in the Important Notices section of this Announcement should be read and understood and the reader's attention is drawn to the detailed terms and conditions of the Placing and further information relating to the Placing described in the Appendix to this Announcement (which forms part of this Announcement).
By choosing to participate in the Placing and by making an oral and legally binding offer to acquire Placing Shares, investors will be deemed to have read and understood this Announcement in its entirety (including the Appendix) and to be making such offer on the terms and subject to the conditions of the Placing contained therein, and to be providing the representations, warranties and acknowledgements contained in the Appendix.
All investors who participate in the Placing will be required to indicate whether they wish to settle their allocation in Sterling or in US dollars at the same time as they place their order. The Placing Price in Sterling and US dollars will be provided by the Bookrunners at the time of communicating allocations to the Placees. The Placing Price in US dollars will be based on the WM/Reuters mid-point Dollar/Sterling exchange rate at the first hourly fixing time after the closing of the Bookbuilding Process