The CSL Limited (ASX: CSL) share price is in focus on reports that it could be about to make a multi-billion acquisition for the Swiss business Vifor Pharma.
CSL to buy Vifor Pharma?
The Australian Financial Review is reporting that CSL is currently doing due diligence on the Swiss-based drag maker and developer Vifor Pharma.
Whilst it is headquartered in Switzerland, Vifor has operations all around the world.
In the 12 months to 30 June 2021, Vifor’s revenue was reportedly $2.66 billion from the sale of treatments for iron deficiency and chronic kidney disease.
According to Google Finance, Vifor Pharma has a market capitalisation of 6.75 billion Swiss Francs, which translates to $10.32 billion in Australian dollar terms. As you’ll notice, it’s a sizeable acquisition if it goes ahead.
How will the deal be funded?
According to reporting by the AFR’s Street Talk, CSL has tasked Bank of America’s investment banking unit to work on funding packages that could lead to it raising $4 billion from investors if the bid for Vifor is successful.
Reportedly, sources say that the negotiations were advanced as at Thursday afternoon, though it could still take “weeks” to reach a final agreement.
Would this be good for the CSL share price?
This deal would add around US$2 billion to CSL’s revenue, so it would diversify and add to CSL’s earnings.
The more that CSL can offer patients and clients, the better it can help the world (and make profit). CSL has a formidable research and development (R&D) department and is spending around 10% of its revenue each year on R&D.
R&D spending is really important because it unlocks the next earnings streams for new and improved healthcare products.
CSL has proven to be one of the most effective large ASX blue chips at growing globally and making returns. This deal could be another step in the long-term development of the business.
The CSL share price hasn’t done much over the last year and I’m not sure if it’s worth buying today, But, after getting a closer look at the details of a potential deal, I’d probably be happy about buying Vifor if I were a CSL shareholder.
