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17-Oct-2012
Morning Report\


Biota Holdings Ltd - (BTA.ASX, $0.68/sh, Mkt Cap $123m) – Scheme meeting 23 October to pave way for US listing TRADING BUY

The revised scheme meeting to approve the merger of BTA and Nasdaq listed Nabi is scheduled to on Tuesday 23rd October, paving the way for BTA’s move to the US. To recap the planned merger is effectively a reverse takeover, which will see BTA delist from the ASX, relocate and relist in the US subject to both companies shareholder approval.
Given the recent revision to the terms of the deal, to appease Nabi shareholders, we see little risk of the resolution being passed both domestically and in the US. Under the revised terms Nabi will contribute $US27m (previous $US54m), with the excess funds returned to Nabi Shareholders. As a result, BTA shareholders will emerge with a larger stake of the combined entity, which we view as a favourable outcome given expectations of a re-rating post listing on the Nasdaq.
We believe the listing on the Nasdaq and relocation to the USA is a positive and logical next step for Biota and believe it has the potential to significantly re-rate BTA given the US markets better value recognition for pharmaceutical companies as well as the benefit of providing BTA with access to the largest healthcare capital market in the world.
Following the merger, Biota Pharmaceuticals will have three royalty generating products, a US$231 million contract with BARDA for the advanced development of laninamivir; a portfolio of clinical and pre-clinical programs and over US$100 million in cash. With an EV of only ~$85m on the ASX, the argument for a re-rating in the US is strong.
While on a pure metrics we calculate the deal favours Nabi at face value, we believe this is more than offset by the cost savings of a cheap US listing and long-term benefits including wider awareness, recognition and access to capital.

( Source: http://www.fostock.com.au/announcements/biota-holdings-ltd-bta-asx )