Arana urged to accept undervalued takeover offer Font Size:DecreaseIncreasePrint Page:Print Rebecca Urban | April 11, 2009
Article from: The Australian SHAREHOLDERS of Arana Therapeutics are being urged to accept a takeover bid that could undervalue the company by as much as $150 million, according to an independent analysis of the business.
In a report commissioned by shareholders, Melbourne consultancy firm Acuity Technology Management has valued the biotech company at $400-$467 million.
Arana, which is developing a pipeline of drugs for inflammatory diseases and cancer, is the subject of a $318 million takeover offer from Nasdaq-listed Cephalon International.
The shareholders, led by Richard Super and Bryce Whetton, decided to take matters into their own hands after Arana's directors, who have endorsed Cephalon's proposal, refused to commission an independent expert's report -- a common practice in takeover scenarios. Their decision also attracted the attention of the Australian Securities & Investments Commission, which has received a raft of complaints from Arana shareholders who believe the company is being offloaded cheaply. ASIC last week requested that Arana publicly justify its position.
In a supplementary target's statement released on April 8, the company said that it had decided against commissioning an independent report because Cephalon had proposed to pay cash for the company.
It also said the bidder's initial foothold of a 19 per cent stake meant the takeover had a high probability of succeeding.
Arana has also pointed to the difficulty in providing meaningful valuations of early-stage technology assets in the existing market.
Despite having about $175 million in the bank, Arana's share price had been trading at a discount to its cash position and future royalties from commercial partners. "This is not to suggest that the Arana technology has no fair value -- only that the current risk-averse market ... does not appear to ascribe significant value to such assets," the company said.
Arana chairman Robin Beaumont has made no secret of the fact that, while he supports the bid in the absence of a superior offer, he is not happy about the price.
"I would be delighted if (the valuation) caused someone to rethink their offer or someone to make a higher bid," he told The Weekend Australian.
However, Mr Beaumont said discussions with shareholders had led him to believe that Cephalon could easily get to 70 per cent acceptance.
Cephalon has 27 per cent of Arana's shares and has until May 1 to get to 50 per cent.
It has promised to increase the offer by 5c a share to $1.45 should it obtain 90 per cent acceptance.
Arana's share's were trading at just 83c the day before the bid was announced, and last closed at $1.37, suggesting the market believes there is little chance of a higher offer emerging.
The report by Acuity's David Randerson, who has extensive experience valuing pharmaceutical and technology companies, points out that the valuation was done on publicly available information only.
His report makes no judgment as to whether the proposed offer by Cephalon was "fair or reasonable to shareholders".
"An examination of the company's share price in recent months may not support the valuation, although we offer the opinion that (Arana) is financially strong and has sufficient cash reserves to continue the drug development programs," the report said.
A spokesman for Cephalon said the company viewed the shareholder-commissioned valuation as "not credible and highly speculative".
AAH Price at posting:
$1.37 Sentiment: LT Buy Disclosure: Held
