announcement 1/36 May 2004ASX AND MEDIA...

announcement 1/3
6 May 2004
ASX AND MEDIA ANNOUNCEMENT
Clarification on contingent dividend and Merger opportunities and benefits
Peptech and Agenix announced on 29 April 2004 their intention to merge via a
scheme of arrangement. The merger terms involve Agenix shareholders receiving
seven Peptech shares for every 10 Agenix shares held. In addition Peptech
shareholders are to receive a dividend contingent on the successful resolution of the
dispute between Peptech and Centocor.
There appears to be some confusion about the value that would flow to both Peptech
and Agenix shareholders from the resolution of the Peptech and Centocor dispute.
Consequently both Agenix and Peptech wish to release this clarification to address
this issue and to restate the key terms relating to the contingent non-transferable
dividend.
Contingent Dividend
In recognition of the risk which Peptech shareholders have borne over the past few
years in relation to the company¡¦s dispute with Centocor (which is currently the
subject of arbitration), the Peptech board announced that it proposed to pay a 20
cent dividend to all Peptech shareholders listed on the Peptech register, on the
effective date of the Agenix share scheme (estimated to be in August/September),
provided that certain conditions were met.
Under the proposal, Peptech will pay a dividend of 20 cents per Peptech ordinary
share if:
(a) after successful resolution of the Centocor dispute, Peptech receives
sufficient funds from the resolution of the Centocor dispute to pay the
dividend (post tax);
(b) the scheme of arrangement for Peptech to acquire the Agenix ordinary
shares becomes effective; and
(c) the payment date for the dividend occurs within 24 months of the record
date for the dividend.
The contingent dividend will not be paid using any of Peptech¡¦s existing cash balance
of $40 million.
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A successful resolution of the dispute with Centocor is expected to have two
components:
􀂃 A lump sum amount payable immediately on the resolution which will be
equivalent to the amount which has accrued throughout the period Centocor has
withheld royalty payments; and
􀂃 An ongoing royalty stream which will be based upon future sales of products sold
by Centocor, which fall within the scope of Peptech¡¦s patents.
The dividend would only be paid if Peptech received a pre-tax amount of at least $46
million in respect of royalties accrued but not yet paid (ie the first component of a
successful resolution with Centocor).
This is expected to be only a portion of the amount that Peptech would receive for
that first component.
In addition to this amount it is expected that Peptech will continue to receive on-going
royalties based on the licence agreement it has with Centocor, for products sold by
Centocor, which will fall within the scope of Peptech¡¦s patents.
Peptech executive chairman, Mel Bridges said Peptech directors did not believe the
value of the resolution of the Centocor dispute was sufficiently reflected in the
Peptech share price and that this, in combination with the contingent dividend, may
be causing some confusion.
¡§The market appears to have arrived at a valuation for Agenix by first removing 20
cents from the Peptech share price¡¨.
¡§The removal of 20 cents from the Peptech share price reflects the market¡¦s
misunderstanding of the proposed conditional dividend and skews the relative share
ratio proposed between the two companies. As a result, it undervalues both Agenix
and Peptech¡¨, said Mr Bridges.
In the joint ASX release on 29 April 2004 announcing the merger, the companies
stated that ¡§Based on the one-month volume weighted average share price of
Peptech and Agenix as at 27 April 2004 of $1.61 and $0.90 respectively, the
proposed terms represent a premium of 25% for Agenix shareholders.¡¨ The implied
Agenix price underpinning this statement was $1.13.
The Peptech board has allowed a time window of 24 months in which to resolve the
dispute with Centocor. The dividend would be paid as soon as possible following the
receipt of funds, upon the successful resolution of the dispute.
The decision to provide Peptech shareholders with this conditional dividend reflected
Peptech¡¦s view of the strength of its prospects of successfully resolving the Centocor
dispute, said Mr Bridges.
Opportunities and benefits
If the merger proceeds, both Peptech shareholders and Agenix shareholders will
share in the value of any payment by Centocor for the accrued but unpaid royalties,
over and above the funds required to pay the 20 cent dividend, plus any ongoing
revenue streams arising from the Centocor licence agreement.
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In these circumstances, the post-merger company would not only have very strong
cash reserves but a guaranteed strong cash inflow from ongoing payments from both
Abbott and Centocor.
All shareholders in the post-merged entity would benefit from these cash reserves.
Agenix Chairman, Mr Ravi Govindan said the proposed merger would deliver
significant benefits and synergies to shareholders of both companies. They provide
a strong platform for future growth and a compelling case for supporting the merger,
he said.
¡§We can greatly increase the growth and earnings potential of our individual
companies through a merged group of significant financial and industry strength,¡¨
said Mr. Govindan.
Strategic and financial highlights of the merged company included:
􀂃 Solid financial base with which to fund its continuing growth strategy
􀂃 A strong portfolio of products and aggressive development program, leveraging
existing technology
􀂃 A large and profitable Animal Health Division providing a platform to grow to No.
1 in the sector
􀂃 A combined strength in Molecular Imaging with Agenix¡¦s ThromboViewÆÊ and
Peptech¡¦s cancer target. If both of these products are able to be successfully
commercialised, the merged company foreseably is capable of generating an
annual revenue stream from these two products in excess of $400 million per
annum with the capability of adding up to 20% profitability to the bottom line.
Agenix has previously advised the market that ThromboViewÆÊ has the potential
to build to a minimum of $320 million per annum at its peak and to be generating
net profit after tax per annum of 20%.
􀂃 A significant holding of 36% equity in UK based domain antibody drug developer,
Domantis
􀂃 Scientific success with outstanding pre-clinical results recently achieved for
Peptech¡¦s first anti-TNF domain antibody target for the treatment of antiinflammatory
diseases such as arthritis.
Mr Govindan said the merger would also provide a strong base from which to pursue
aggressive growth through further mergers and acquisitions in the above areas as
well as clinical diagnostics.
ENDS
Further information:
Mel Bridges Donald Home
Executive Chairman Managing Director
Peptech Limited Agenix Limited
Ph: 0413 051 600 Ph: 0438 500 255
Released by:
Stephanie Paul
Managing Director
Phillips Group
Ph: (07) 3230 5000 or mobile: 0418 753 062