Good morning!

An interesting Budget yesterday from George Osborne. I won't cover that here, as there are any number of other places where summaries and analysis can be found.


SkyePharma (LON:SKP)

Share price: 427p (up 3.3% today)
No. shares: 104.8m
Market cap: £447.5m

(at the time of writing, I hold a long position in this share)

Results y/e 31 Dec 2015 - sparkling results were published yesterday for this, "expert oral and inhalation drug development company". Pharmaceuticals is a sector I normally avoid, unless the figures are easy to understand, which they are in this case - SKP has ticked the right boxes to be considered a good GARP (growth at reasonable price) share for some time. It's one that I've written about here 10 times before.

Pre-exceptional EPS rose from 17.5p in 2014, to 25.1p in 2015. Even after recent rises, the shares don't look particularly expensive to me, at a PER of 17.0 times, although there are lots of moving parts with this company's accounts - e.g. milestone payments, etc. So it really needs more in-depth analysis which is beyond my pay grade in this sector.

I've always thought SKP would, sooner or later, make a bid target, and that's what's happened:

Recommended merger - also announced yesterday. The boards of Vectura (LON:VEC) and SKP have reached agreement on an all-share merger, whereby SKP shareholders will receive 2.7977 Vectura shares for each SKP share. There is also a partial cash alternative.

Personally I'm not at all happy about this. I don't want Vectura shares! I want to keep my SKP shares. So it will be interesting to see how the shareholder vote goes.

With any luck, this not particularly good merger deal might smoke out a proper bid (at a decent premium) for SKP.

EDIT: A further point that I forgot to include before, is that all-share mergers can be problematic. The trouble is that often there is part of the acquired company's shareholder base that doesn't want shares in the acquirer. So they sell in the market. That can cause a terrific overhang of shares, which can last a very long time.

I noticed this happen when Matchtech (LON:MTEC) bought Networkers Intl in Apr 2015, and the share price has never recovered - even when MTEC puts out good news,…

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