* Agreed offer values SkyePharma at 410.15 pence a share
* Combined group market value more than 1 billion pounds (Adds more on rationale for deal, comment from CEO)
By Ben Hirschler
LONDON, March 16 (Reuters) - Respiratory drug specialistVectura has agreed to buy rival SkyePharma for441 million pounds ($621 million), in a notable piece ofconsolidation among Britain's universe of small biotechcompanies.
The tie-up will create a lung disease group with expertiseacross different inhaler technologies and a combined marketvalue of more than 1 billion pounds, which should attract awider range of institutional investors.
Unlike large, successful biotechnology firms in the UnitedStates, British firms have yet to achieve critical mass and, asa result, have often struggled to secure an active followingfrom investors and analysts.
"I would expect to see a number of new holders coming intothis stock, given our mid-cap market capitalisation with thecombination," said James Ward-Lilley, Vectura's chief executive,who will become CEO of the enlarged group.
"We have today really got the opportunity to be an industryleader in terms of the device and technology focused on inhaledrespiratory airway disease."
The two companies receive royalties from a number ofmarketed products and others are in the pipeline. There isparticular excitement over Vectura's VR315, a generic version ofGlaxoSmithKline's blockbuster lung drug Advair, thatcould be approved next year.
SkyePharma shareholders will get 2.7977 new shares for eachshare held, valuing SkyePharma at 441.3 million pounds. Vecturasaid it expected the deal to boost earnings in the first year.
The agreed offer, announced by both firms on Wednesday, isworth 410.15 pence per share and represents a modest 4.2 percentpremium to SkyePharma's closing price on March 15, although itis 13.6 percent above the 90-day average price.
Alternatively, SkyePharma shareholders can choose to receivea part of the offer in cash.
An all-stock deal would result in SkyePharma shareholdersowning about 41.75 percent of the combined company. If the 70million pounds available under the cash alternative is paid infull, SkyePharma shareholders would own about 37.62 percent ofthe combined company.
Samir Devani, an analyst and head of Rx Securities, said themerger had strong industrial rationale and would create a"one-stop shop" for respiratory drug development.
Vectura said it had identified annual pre-tax synergies ofapproximately 10 million pounds, which are expected to be fullyrealised by 2018.
The two companies had combined 2015 revenue of 153.9 millionpounds, generating earnings before interest, tax, depreciationand amortisation (EBITDA) of 50.5 million pounds.
The deal has been recommended by both companies' boards andis backed by HBM Healthcare Investments, which holdsapproximately 28.5 percent of SkyePharma.
Vectura was advised by JP Morgan and Rothschild, whileLazard worked for SkyePharma.
($1 = 0.7096 pounds) (Additional reporting by Vidya L Nathan; editing by AnupamaDwivedi and Jason Neely)
Glaxosmithkline (GSK)