EDMONTON, ALBERTA—In response to Paladin Labs Inc.'s $50million takeover bid, Afexa Life Sciences Inc. has, after reviewing the offer,announced that its Board of Directors unanimously recommends that Afexashareholders reject the offer. Paladin's offer, the Board claims, significantlyundervalues Afexa's shares.
"The Board of Directors is unanimous in recommending to ourShareholders that they reject this offer and not tender their Common Shares," saidWilliam B. White, Chairman of the Board of Directors of Afexa, in a pressrelease. "We believe the Paladin Offer is inadequate even to reflect the valueof our marquee product COLD-FX, and gives little to no value of our growthopportunities through new products and new markets. Afexa is a great businesswith a strong track record and great prospects for the future."
Paladin first made their offer back on August 10, followingan announcement in July that the company had bought enough shares to have a beneficialownership of Afexa common stock, approximately 14.94 percent of the totalissued and outstanding common shares. Paladin originally approached Afexa fornegotiations to discuss alternatives, but the companies were unable to reach anagreement, prompting the offer. Paladin's offer would give Afexa shareholdersthe option to tender their shares for $0.55 per share in cash or 0.013 of aPaladin share for each share of Afexa stock.
In a press release announcing the takeover bid, JonathanRoss Goodman, President and CEO of Paladin, said they feel the proposal is "avery compelling offer, with a significant premium to the shareholders ofAfexa…our offer provides an opportunity for Afexa shareholders to receive animmediate and attractive cash premium for their investment at a time when theoutlook for Afexa is uncertain." At the time the offer was made, it representeda 57 percent premium to the price of Afexa's shares on July 14, the day beforePaladin's announcement of the amount of stock it now owns, and a 16 percentpremium to the closing prices of $0.476 per share that Afexa's shares stood atas of August 9, the day before Paladin commenced its offer.
After reviewing the offer, however, Afexa's Board stuck withits original rejection of the offer, deeming that it "significantly undervaluesAfexa's marquee product, COLD-FX, and does not adequately compensateShareholders for the COLD- FX business, which has outsold Tylenol and Advilcold and flu products in Canada over each of the last four years." Therejection, the Board continues, is also based on the facts that the offer doesnot recognize the value of Afexa's pipeline and that the offer is"opportunistic and coercive to Shareholders and is an attempt to acquireeffective control of Afexa without paying adequate compensation." All ofAfexa's directors and officers intend to reject the offer, according to a pressrelease issued by the company.
Afexa's Board of Directors is currently "pursuing othervalue-maximizing alternatives and superior proposals with the aim of deliveringgreater value for Shareholders and with a more certain outcome," the companynoted in a press release. Though no alternatives were assured or listed, thecompany still stands behind its advisement that Afexa shareholders not participatein the Paladin offer, which expires September 15.