Forgive me if that has already been posted - have not read...

Forgive me if that has already been posted - have not read everything today.

FWIW - I think this is an absolutely rotten deal that does nobody at BTA any credit. I exited stage left on the open yesterday as I fear six months of share price weakness to come.



Dealpolitik: Biota’s Move Across the Pacific is More Complex Than it Seems
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It all sounds simple enough for Biota Holdings. Give up its listing on the ASX and become listed on NASDAQ in the U.S. to take advantage of higher valuations and better opportunities. But moving out of one complex regulatory system (Australia) and into another (U.S.) is not a simple project.

In short, it is what lawyers’ dreams are made of.

Biota’s plan for its NASDAQ listing is a so-called “backdoor” listing. The deal is structured so Biota will actually be acquired by an existing NASDAQ-listed company for its shares. That company, called Nabi Biopharmaceuticals, has very little in the way of businesses at the moment having “suffered a significant setback” in its “sole remaining product currently in development,” according to Nabi’s annual report filed with the U.S. Securities and Exchange Commission last month.

Such transactions have become somewhat controversial in the U.S. Most listings in the U.S. are accomplished through a more traditional initial public offering which involves an underwriting process and a more extensive regulatory review of the company’s disclosure. Backdoor listings, sometimes called “reverse mergers” have been prominently in the news in the US recently because they were used by some Chinese companies to go public, and subsequently some of those companies were accused of fraud.

To complete its transaction, because of U.S. requirements, Biota will need to do more than go through the typical Australian scheme of arrangement process, which of course is required. The deal with Nabi is conditioned on the parties being able to clear the transaction with the SEC. To do so, Nabi will need the SEC to sign off on the proxy statement it needs to send its shareholders. In addition the SEC will need to issue a so called “no action letter” saying that the Nabi shares can be issued to shareholders of Biota without a formal registration process.

Although such an exemption should be obtainable, expect the SEC to carefully review the transaction and related disclosure before clearing the deal in view of the SEC scrutiny of backdoor listings, even though no Chinese companies are involved in this transaction.

Moreover, there could be an issue that comes up in that review. Avoiding that formal registration process with the SEC could become unworkable if the SEC were to decide that Nabi met the SEC definition of a “shell company.” A shell company is one which has only nominal operations and nominal non-cash assets.

Nabi’s annual report from last month said it was not a shell company. That was probably because of that sole remaining product that suffered a “significant setback.” But in connection with its deal with Biota the economic rights from that sole remaining product are being distributed to Nabi’s existing shareholders (through what it calls a Contingent Value Right) together with a bunch of cash.

Obviously, Nabi will argue that it is not a shell company at the time of the merger, but it is yet to be seen if the SEC will agree. Even if it turns out the SEC takes the position Nabi is a shell company there may be paths to restructure the transaction, but they probably involve a more complex and time-consuming full SEC registration process.

The SEC clearance process will only be an orientation process to the US system for Biota. Following the transaction Biota will need to comply with the full U.S. disclosure system. This includes quarterly reporting, US style disclosure (including extensive risk factors in its periodic filings) and the requirement that every time it wants to issue more shares it must either register them with the SEC or utilize an exemption from such registration.

But in return for that, as a Delaware corporation, it will have a much freer hand defending itself from takeovers. Delaware corporations are permitted to adopt “poison pills” in the face of a hostile takeover. And in the U.S. we do not have the limitations on taking “frustrating actions” in the face of a takeover bid, as long as the target is acting reasonably and in a manner it believes in the best interests of its shareholders.

Biota, welcome to a new world.