Javelin's shareholders launch enquiry into "unfair" acquisition offer
This article was originally published in Scrip
Javelin Pharmaceuticals' shareholders have hired a law firm to investigate whether Myriad Pharmaceuticals' $96 million offer for the company made on December 18th is unfair.
Finkelstein Thompson will investigate the potential unfairness of the $1.50 per share offer and the process by which Javelin's board of directors considered and approved the deal.
The shareholders appear to be particularly concerned that the offer is considerably lower than the $3.50 per share target price that certain analysts had set. Soon after the acquisition's announcement, Wedbush analysts reportedly lowered their rating for Javelin from 'outperform' to 'underperform' and cut their share price target from $3.50 to $1.50 per share as the offer was less than they expected.
Myriad stated upon the announcement of the proposed acquisition that its offer represented a 16.8% premium over the average closing price of Javelin's shares over the previous 10 trading days.
However, the investor advocacy group The Shareholders Foundation said that the law firm had found that Myriad's offer appeared "opportunistically timed to take advantage of the current economic downturn" and that it was "grossly unfair, inadequate and substantially below the fair or inherent value of Javelin's stock".
The group cited the fact that Javelin's shares had traded at more than $7 per share in 2007 and suggested that the company's directors may have breached their fiduciary duties by not acting in the shareholders' best interests.
However, the fall of Javelin's share price was not solely due to the economic climate. It fell by 27.5% from more than $2.00 to $1.48 on AMEX on August 11th after Ereska (intranasal ketamine) failed to show analgesic efficacy in a Phase III trial of subjects experiencing postoperative pain after orthopaedic surgery (scripnews.com, August 13th, 2009), leading to speculation that Finkelstein Thompson may find it difficult to prove that Javelin's shareholders deserved a better offer.