What will earn more for a BP, owning NWBO or owning 20% of it as an equity partner? If it acquired NWBO, a billion dollars in earnings would go directly to them. On the other hand, if they had 20% of NWBO and the company earned a billion, if we put a P/E of 30 on the company, the company would be worth $30 billion, their 20% share would be worth $6 billion in stock. Of course, they'll have probably paid $20 a share when they bought in, so the first billion they earned might just be break even, or slightly profitable, but each billion thereafter could lead to billions of dollars in added stock value.
My point is that they could potentially earn far more owning a percentage of the company than if they bought the entire company for its future earnings. Certainly, the BP's share price should grow for earning added billions, but very probably at a P/E that's closer to 10. With a smaller investment they can potentially achieve greater gains by leaving NWBO trading independently.
Perhaps equally important, NWBO's business and the business of a BP are very different. The two shouldn't be integrated, so if acquired, NWBO should become a wholly owned subsidiary of the BP, not integrated into it. I don't know if ownership of 20%, or 30% or 40% would make the most sense, but regardless, it would represent enough to effectively run the company. Why? Because the BP would also be allied to at least some of the Institutions that will own the company so anything they demand be brought to a shareholder's vote will go their way. The company will recognize this, so they'll take their guidance from their BP partner. If in the future they wished to purchase the company, again as long as their Institutional supporters were profiting nicely in the buyout, such an action couldn't be prevented.
Roche has done this with companies like Genentech, it's now wholly owned by Roche, but I believe it started independently, it was then acquired by them, then spun off while maintaining majority ownership, then again acquired. I believe Roche made substantial money with each move it made, and it's very possible that they'll spin off Genentech again in the future.
This isn't something that should happen prior to NWBO achieving a market cap worthy of an offer that values the company well into double digit billions, but that could come faster than most think if international approvals are anticipated in the near term.
Gary
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