Although Afexa hadn't made any official statement as of Sept. 28 (when this story was posted) regardingthe latest twist in this battle to acquire it, Afexa's chairman, William White,had noted in a Sept. 22 news release, when Paladin had announced an intent toincrease its hostile offer, "We are pleased that Paladin has finallyacknowledged that the value of Afexa significantly exceeds the $0.55 per shareoffer they originally made. Although we welcome a higher bid from Paladin, wewill oppose their application tomorrow before the Alberta Securities Commissionto cease-trade our shareholder rights plans because we believe that these planscontinue to have value by allowing Afexa to seek and consider competing bidsand by preventing Paladin from attaining a blocking position through marketpurchases or by taking up any and all shares tendered to its bid which coulddeter or frustrate other bids. Should Paladin choose to increase their offer,we would invite them to further amend their offer at the same time to include aminimum tender condition so that they will only acquire control of Afexa if amajority of our shareholders (other than Paladin) support their bid."
As it happens, the Alberta Securities Commission did strikedown Afexa's "poison pills" (the shareholder rights plans) that had stood inthe way of Paladin's bid, keeping Paladin in the fight to win Afexa.
The brass ring that both Valeant and Paladin are after is over-the-counterflu remedy Cold-FX, sales for which Valeant plans to boost by marketing it inthe United States and globally—such as in Australia, Latin America andCentral Europe—if it successfully acquires Edmonton-based Afexa. Valeantalready sells several over-the-counter products in countries such as the U.S.,Mexico and Australia, including moisturizers, skin care products and acnetreatments.
"Cold-FX is obviously the driver," Pearson said in aninterview with The Canadian Press. "Whatwe believe we can do is take this product, which is already well established inCanada, and establish it in other markets which will expand that growth."
Mark Beaudet, interim chief executive of Paladin,maintains that his company's offer is superior to Valeant's because Afexashareholders can get access to Paladin shares. "The share alternative givesAfexa shareholders the choice of continuing to have an interest in Cold-FX andin the specialty pharmaceutical sector by accepting shares in Paladin," hesaid. "The Valeant bid provides neither the value nor the choice of Paladin's enhancedoffer."
"Valeant's quick and decisive response to Paladin's latestbid suggests to us that it is also highly interested in the Afexa assets, andthat it could seek to outbid a potential increased offer from Paladin," noted Desjardinsanalyst Pooya Hemami in a research note, adding that Paladin would record agross trading profit of several million dollars if Valeant's increased bid isultimately successful. On the other hand, he noted, Paladin could continue toup the ante itself, and he predicted the company might ultimately go as high asbetween 90 cents and $1 per share.
