MISSISSAUGA, Ontario— Afexa Life Sciences Inc. haslearned that sometimes, being picky pays off. The health-science company turneddown a proposal from Paladin Labs Inc. just last week, a $50 million takeoverbid that Afexa's Board of Directors said significantly undervalues the sharesof the company. Today, the company announced that its Board has unanimously approved of anoffer from Valeant Pharmaceuticals International Inc. to acquire Afexa for approximately $77.5 million.
Under the terms of the companies' agreement, Afexa's shareholders willreceive $0.724 in cash per share of common stock they hold, which represents anapproximately 30 percent premium to Afexa's 30-trading day volume weightedaverage closing price and a 49 percent premium over its closing price of $0.476the day before Paladin's proposal was announced. The transaction is structuredas a takeover bid, and Afexa has a 30-day "go shop" period during which it ispermitted to solicit negotiations for competing proposals that might present asuperior offer, which period ends September 29. The agreement also stipulatesthat Valeant has a right to match any superior proposals, and that Afexa willpay Valeant a termination fee of approximately $3.83 million if it terminatesits agreement with Valeant to engage in a superior offer.
"The Board is pleased that Valeant has come forward with anoffer that is significantly higher than Paladin's hostile bid and that theyrecognize the situation Afexa and the Board finds itself in as a result of thathostile bid by affording us a 30-day "go shop" period," said William B. White,Chairman of the Board of Directors of Afexa. "We are pleased to have the supportof Valeant's management team and board of directors for a transaction that webelieve delivers significantly more value to our shareholders and shoulddeliver significant benefits to our customers and employees. Valeant is beingcooperative and sensitive to our situation. We appreciate their significanteffort to get to the position of making this offer and understand their need tobe compensated in the event a superior proposal does evolve through ourprocess."
Paladin's unsolicited bid to Afexa was made on August 10 andwould allow Afexa's shareholders to tender their stocks for $0.55 per share incash or 0.013 of a Paladin share for each share they held. Afexa's Board saidthe offer was opportunistic, ignored the value of the company's pipeline and"gives little to no value of our growth opportunities through new products andnew markets." Valeant's offer represents a 29 percent premium over the cashconsideration and 49 percent premium to the alternative share considerationoffered by Paladin, and Afexa's Board has unanimously recommended that thecompany's shareholders tender their shares to the offer.
"We are pleased to have the full support of Afexa'smanagement team and board of directors for a transaction that we believe shoulddeliver significant benefits to our customers, employees and shareholders," J.Michael Pearson, chairman and chief executive officer of Valeant, said in apress release. "Afexa's strong franchise of consumer brands, including COLD-FX,Canada's leading over-the-counter cold and flu treatment, will be a solidaddition to our developing OTC product portfolio in Canada."
The approval and recommendation from Afexa's Board ofDirectors is based on a fairness opinion from its financial advisor, ScotiaCapital Inc., determining Valeant's offer to be fair from a financial point ofview for Afexa's shareholders. Valeant has entered into lock-upagreements with directors and officers of Afexa, by which they have agreed totender all of the shares of Afexa's common stock that they hold, representing8.8 percent, in the aggregate, of the outstanding shares on a fully-dilutedbasis. In addition, in accordance with the agreement, Afexa will waive theapplication of the shareholder rights to the offer, and will not take action towaive the application to any other acquisition proposal.