NEW YORK, Aug. 16, 2012 /PRNewswire/ -- The Mangrove
Partners Fund, L.P., one of Nabi Biopharmaceuticals' largest
stockholders, today announced that it has delivered a letter to the
stockholders of Nabi Biopharmaceuticals (Nasdaq: NABI).
The full text of the letter follows:
August 16, 2012
Dear Fellow Stockholders:
Your support in voting against the proposed merger (the
"Transaction") between Nabi Biopharmaceuticals ("Nabi" or the
"Company") and Biota Holdings Limited, a Melbourne, Australia company ("Biota") is
crucial to defeating this value-destroying transaction. The
Mangrove Partners Fund, L.P. and its affiliates ("Mangrove
Partners") strongly oppose the proposed Transaction because it
fails to return to Nabi's stockholders the underlying value of the
Company's assets, a value that we believe to be as much as
$2.40 per share in cash, while
enriching Nabi executives at the expense of Nabi's
stockholders.
Mangrove Partners strongly opposes the proposed Transaction and
Transaction Proposals because we believe that:
- the proposed Transaction is an inferior alternative to several
readily available alternatives that provide for the return of
substantially all of the cash on the Company's balance sheet to
Nabi's stockholders;
- Nabi's stockholders are being asked to invest in a speculative
Australian biotechnology company that has lost money for the past
two years and where the future leadership is uncertain; and
- the interests of Nabi management and the Nabi Board are not
aligned with the best interests of stockholders in connection with
the proposed Transaction.
In fact, Mangrove Partners believes the Transaction's primary
purposes are (1) to secure substantial payments in the form of
special VIP bonuses and change of control benefits for Nabi's
executives and (2) to grant Nabi's CEO, Dr. Raafat
Fahim, and Chairman, Dr. Geoffrey Cox, lucrative seats on
the Board of Directors of the newly combined entity.
We believe that we are not alone and that our deep concerns and
opposition to the Transaction are shared by Nabi's stockholders as
well as Biota's stockholders. In the nearly four months since the
announcement of the proposed Transaction, Nabi's share price has
declined by over 10% while Biota's has declined by nearly 30%. It
seems clear to us that the proposed Transaction has no merit and
destroys value for both Nabi and Biota stockholders. We question
who benefits from the proposed Transaction and can only come to the
conclusion that the Transaction is for the benefit of Nabi's
insiders.
AN ORDERLY LIQUIDATION OF NABI WOULD DELIVER GREATER VALUE TO
NABI'S STOCKHOLDERS
Mangrove Partners believes that stockholders can receive a
minimum of $1.87 per share through an
orderly liquidation. Following the modified Dutch Tender
Offer, Nabi has $2.40 per share in
cash. According to Nabi's amended Merger
Implementation Agreement with Biota, Nabi estimates that there
would be approximately $0.48 per
share in liquidating expenses ($13.5
million), and $0.04 per share
in remaining operating expenses ($1.5
million) until September 30,
2012. In contrast, under the terms of the Transaction,
Nabi's stockholders would receive only $1.70 per share in value. This would
come in the form of $1.59 per share
in stock of the combined entity and $0.11 per share in a future dividend or return of
capital.
We feel confident that an orderly liquidation will provide a
superior return to Nabi's stockholders and is fully within the
control of Nabi's management and Board. Mangrove Partners believes
that there are superior alternatives to a traditional liquidation
by either (1) returning substantially all of Nabi's cash holdings
to Nabi's stockholders in the form of a special dividend and then
consummating a reverse merger with a company seeking a public
listing, or (2) returning substantially all of Nabi's cash holdings
to Nabi's stockholders in the form of a special dividend and then
paying a third-party liquidation expert to undertake the three-year
wind-down of Nabi and assume all future liabilities of the
Company. Either one of these alternatives has the
potential of returning far superior value to Nabi's stockholders
than the proposed Transaction and accomplishes this in less than
three years. Even if these alternatives are not implemented
and Nabi pursues a formal Delaware
liquidation, the $1.87 per share of
value would still be far greater than the value of the proposed
Transaction.
Moreover, Mangrove Partners believes that our own estimate of
$1.87 per share liquidation value is
an extremely conservative case since Nabi management's estimated
$13.5 million in liquidating costs
are likely overstated. Since the failure of both Phase 3
NicVAX trials in 2011, Nabi has reduced operating expenses and
headcount and has eliminated unused facilities to conserve
cash. At this point, Nabi rents a single facility in
Rockville, Maryland on a month to
month basis, employs fewer than 15 employees, and has immaterial
working capital requirements. In fact, the majority of
the $13.5 million in liquidating
costs that are assumed in the $1.87
liquidation value is comprised of severance payments, change of
control benefits, and special bonuses to Nabi's executives.
Mangrove Partners believes some or all of the change of control
benefits and special bonuses may be avoided in an orderly
liquidation, and that the cash savings can be rightfully returned
to Nabi's stockholders. Should the merger be voted down, Mangrove
Partners will continue to be relentless in ensuring that value is
maximized for stockholders.
Lastly, the liquidation proposed by Mangrove Partners has
conservatively assumed no value for any other assets such as the
Company's ownership of NicVAX, future potential royalties from
sales of Phoslyra, the value of Nabi's public shell, and
$167 million in federal net operating
losses. We believe these assets hold value and can be monetized for
the benefit of Nabi's stockholders to provide further upside that
is not available in the proposed Transaction.
THE LIQUIDATION ALTERNATIVE DELIVERS GREATER CERTAINTY TO
NABI'S STOCKHOLDERS
Not only does an orderly liquidation deliver greater value, but
it also provides greater certainty. Whereas Nabi's stockholders
would receive cash through an orderly liquidation, under the
proposed Transaction Nabi's stockholders would be forced into
investing in a speculative biotechnology company that has lost
money for the past two years and where the future leadership is
uncertain. In the last two years alone Biota has generated
losses of over $55 million AUD while
generating just $30 million AUD of
revenues. This has been accompanied by tremendous value
destruction for Biota stockholders as the share price has declined
by nearly 80% since October 2009. We question whether this
will change in the newly combined company considering
what seems to be a complete lack of leadership and plan at
Biota. The current Biota CEO and CFO are expected to join the
combined company only for a transition period, and no new
management team has been identified. Nabi's
stockholders have no assurances regarding the strategic direction
of the combined company under a new management team.
Second, Biota's pipeline is speculative. It is in its early
development stages and comes with substantial risks. Biota's main
pipeline asset, Laninamivir, has yet to conclude Phase 1 testing in
the United States. Biota has refused to commit to a
development timeline and may delay preparations for a Phase 3
clinical trial on its other main development asset which targets
human rhinovirus (HRV). Biota's prospects of success
are not encouraging as over 80% of Phase 1 drugs and over 50%
of Phase 3 drugs ultimately fail. Indeed, we are surprised that
Nabi's Board believes that its stockholders should double down for
additional drug development risk after its Phase 3 NicVAX program
failed, which caused the stock to decline 66% in a single day last
year.
Last, the patents protecting Relenza, Biota's main asset, will
expire in the next several years. The underlying patents in
the United States expire in
December of 2014, and the European and Japanese patents expire in
May of 2015 and July of 2019, respectively. Nabi's stockholders
should be aware that Relenza's sales are likely to decline
following the loss of patent protection, which is typical in such
cases.
We feel strongly that even if Nabi's stockholders were not
opposed to an investment in Biota's stock, a liquidation is a
superior alternative. Nabi's stockholders could use the
liquidation proceeds to purchase more shares of Biota in the open
market than they would otherwise receive in the Transaction.
Nabi's stockholders who are unwilling to speculate in Biota
should vote against the Transaction. They can then
receive the certainty of cash rather than stock in a money
losing, speculative biopharmaceutical company.
THE PROPOSED TRANSACTION IS ILL-CONCEIVED AND ENRICHES NABI
EXECUTIVES AT THE EXPENSE OF NABI'S STOCKHOLDERS
Mangrove Partners questions the motivation behind the Board's
decision to commit to the inferior offer pursuant to the
Transaction. It is clear to us that both the Board and
management of Nabi have failed. It appears that to save face
and enrich themselves, they are now pushing to get an
ill-conceived transaction completed. While the management and
Board maintain that the proposed Transaction is the best available
alternative to Nabi's stockholders, it is clear that the
Transaction is really in the best interest of management. The
top three Nabi executives would receive lucrative change of control
payments, which are far greater than what they would receive in the
absence of a merger agreement. In addition to change of
control payments, executive management will also receive VIP and
Special VIP bonuses as part of the proposed Transaction.
In addition to change of control and other rewards that
executive management is slated to receive, Nabi's Chairman, Dr.
Geoffrey Cox, and Nabi's CEO, Dr.
Raafat Fahim, are being granted
seats on the Board of Directors of the combined
company. Mangrove Partners believes this amounts to a
special favor to the top two executives of Nabi for delivering a
favorable deal to Biota. As board members, Dr. Cox and Dr. Fahim
will receive cash and options in the combined company. These
can be substantial. For reference, while serving as Nabi's
non-Executive Chairman, Dr. Cox received $238,200 in total compensation in 2011 in the
form of cash and options.
PROTECT YOUR INVESTMENT AND VOTE "NO" ON THE PROPOSED
TRANSACTION WITH BIOTA
WE URGE YOU TO VOTE AGAINST THE TRANSACTION PROPOSALS BY
SIGNING, DATING AND RETURNING THE ENCLOSED GREEN PROXY CARD AS SOON
AS POSSIBLE
Thank you for your support.
About Mangrove Partners
Mangrove Partners is an investment advisor to a special
situations hedge fund. Mangrove seeks to exploit market
dislocations, company specific events and forced selling,
particularly with respect to smaller issues and more complex
instruments. Underpinning Mangrove's research is a deep value
investing philosophy and the search for investments that provide a
margin of safety.
Contact:
If you have any questions or require any assistance with your
vote, please contact SCB Advising, Inc., who is assisting us, at
1-877-786-3323 or 1-646-290-5243.
Steven Balet
(917) 261-2217
SOURCE The Mangrove Partners Fund, L.P.