CPEX Pharmaceuticals Continues to Recommend That Stockholders Vote for the Merger Agreement with FCB
March 17 2011 - 8:53AM
Business Wire
CPEX Pharmaceuticals, Inc. (NASDAQ: CPEX) today announced that
its Board of Directors has completed its review of the unsolicited,
non-binding letter (the “Mangrove Letter”) received from Mangrove
Partners (“Mangrove”) on March 14, 2011 regarding a potential
alternative transaction involving a recapitalization of CPEX (the
“Alternative Proposal”), and unanimously believes that the merger
agreement with FCB I Holdings Inc. (“FCB”) continues to be the most
compelling opportunity for stockholders to immediately and with
certainty realize the maximum after-tax value for their shares.
Consistent with its fiduciary duties and CPEX’s merger agreement
with FCB, the CPEX Board reviewed the Mangrove Letter in
consultation with outside legal counsel and financial advisors and
based on its evaluation has determined not to engage in discussions
with Mangrove regarding the Alternative Proposal. The Board also
reaffirmed its recommendation that stockholders vote FOR the merger
agreement with FCB. In making this determination, the Board
concluded that the Alternative Proposal described in the Mangrove
Letter is not, and is not reasonably likely to lead to, a
transaction that is both financially more favorable to the CPEX
stockholders than the merger with FCB and reasonably capable of
being consummated. In reaching this conclusion, the Board
determined that the Alternative Proposal lacked certainty of
financing and contains flawed valuation assumptions:
Financing is Not Committed and is Highly Conditional -
There are no commitment letters from Mangrove’s supposed financing
sources, one of Mangrove’s potential financing sources has already
withdrawn due to a legal conflict, and the Alternative Proposal is
subject to due diligence.
Dividend Amount and Equity Values Overstated – The Board
believes the Alternative Proposal would not generate sufficient
cash to pay the $28.00 special dividend. Mangrove’s terms do not
appear to properly contemplate expected cash uses such as
transaction fees and expenses, financing fees, Mangrove’s own
proposed interest reserve requirements, the merger agreement
termination fee, or any cash reserves for operations. When properly
considered, the special dividend would be approximately $2.25 per
share less than suggested in Mangrove’s Alternative Proposal.
Additionally, Mangrove’s assumed valuations for the proposed
warrants and equity in CPEX after the recapitalization are overly
optimistic and do not account for the fact that actual debt service
consumes all cash flows for the next six to seven years. Any
residual equity value would be contingent on cash flows being
generated beyond that period.
Value of Notes at Risk of Impairment – Mangrove’s
Alternative Proposal requires that CPEX operate with a less than
appropriate amount of cash on hand. Maintaining insufficient cash
significantly increases the risk of financial distress and possibly
default, which would impair the value of the Notes in the Rights
offering, further diminishing the implied value of this
proposal.
The CPEX Board strongly believes that the merger with FCB
continues to be in the best interests of CPEX stockholders and
reaffirms its unanimous recommendation that stockholders vote FOR
the proposal to approve the merger agreement. Stockholders will
receive $27.25 per share in cash for each of their CPEX shares if
the merger is approved. This is a 142% premium over the price of
CPEX shares on January 7, 2010, the day prior to the date a third
party publicly stated its intention to make an unsolicited offer
for CPEX, and a premium of approximately 12% over the 60-trading
day average closing price of CPEX’s shares on the date prior to the
announcement of the merger with FCB.
On March 24, 2011, CPEX is holding a special meeting of
stockholders to vote on the proposal to approve the FCB merger
agreement. Adoption and approval of the transaction requires the
affirmative vote of a majority of the outstanding shares of CPEX
common stock entitled to vote at the special meeting. Therefore,
failure to vote will have the same effect as a vote against the
adoption of the merger agreement. Whether or not stockholders are
able to attend the special meeting in person, stockholders should
follow the instructions on the form of proxy mailed to them and
submit their proxy via the Internet or by telephone, or complete,
sign and date the proxy and return it in the envelope provided as
soon as possible. If stockholders have Internet access, they are
encouraged to record their vote via the Internet. This action will
not limit stockholders’ rights to vote in person at the special
meeting. If stockholders have any questions or need assistance
voting their shares, they should contact MacKenzie Partners, Inc.,
the Company’s proxy solicitor, at (800) 322-2885 or (212) 929-5500
(call collect) or at cpex@mackenziepartners.com.
About CPEX Pharmaceuticals, Inc.
CPEX Pharmaceuticals, Inc. is an emerging specialty
pharmaceutical company focused on the development, licensing and
commercialization of pharmaceutical products utilizing CPEX’s
validated drug delivery platform technology. CPEX has U.S. and
international patents and other proprietary rights to technology
that facilitates the absorption of drugs. CPEX has licensed
applications of its proprietary CPE-215® drug delivery technology
to Auxilium Pharmaceuticals, Inc. which launched Testim, a topical
testosterone gel, in 2003. CPEX maintains its headquarters in
Exeter, NH. For more information about CPEX, please visit
www.cpexpharm.com.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
CPEX has filed with the Securities and Exchange Commission (the
“SEC”) and furnished to its stockholders a definitive proxy
statement in connection with the proposed transaction with FCB (the
“Definitive Proxy Statement”). This communication may be deemed to
be solicitation material in respect of the merger with FCB.
Investors and security holders of CPEX are urged to read the
Definitive Proxy Statement and the other relevant materials (when
they become available) because such materials will contain
important information about CPEX and the proposed transaction with
FCB. The Definitive Proxy Statement and other relevant materials
(when they become available), and any and all other documents filed
by CPEX with the SEC, may be obtained free of charge at the SEC’s
website at www.sec.gov. In addition,
investors and security holders may obtain free copies of the
documents CPEX files with the SEC by directing a written request to
CPEX Pharmaceuticals, Inc., 2 Holland Way, Exeter, NH 03833,
Attention: Chief Financial Officer. Copies of CPEX’s filings with
the SEC may also be obtained at the “Investors” section of CPEX’s
website at www.cpexpharm.com/investor.htm.
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE DEFINITIVE
PROXY STATEMENT AND THE OTHER RELEVANT MATERIALS (WHEN THEY BECOME
AVAILABLE) BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH
RESPECT TO THE PROPOSED TRANSACTION WITH FCB.
CPEX and its directors and executive officers may be deemed to
be participants in the solicitation of proxies from the security
holders of CPEX in connection with the proposed transaction with
FCB. Information about those directors and executive officers of
CPEX, including their ownership of CPEX securities, is set forth in
the Definitive Proxy Statement (filed with the SEC on February 4,
2011) and in the proxy statement for CPEX’s 2010 Annual Meeting of
Stockholders (filed with the SEC on April 9, 2010), as supplemented
by other CPEX filings with the SEC. Investors and security holders
may obtain additional information regarding the direct and indirect
interests of CPEX and its directors and executive officers in the
proposed transaction with FCB by reading the proxy statements and
other public filings referred to above.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
Certain items in this document may constitute forward-looking
statements within the meaning of the “safe harbor” provisions of
the Private Securities Litigation Reform Act of 1995. These
forward-looking statements involve certain risks and uncertainties
that could cause actual results to differ materially from those
indicated in such forward-looking statements, including, but not
limited to: the proposed transaction with FCB; the performance of
CPEX; the benefits of the proposed transaction with FCB and such
other risks and uncertainties as are detailed in the Definitive
Proxy Statement, in CPEX’s Annual Report on Form 10-K filed with
the SEC on March 29, 2010, and in the other reports that CPEX
periodically files with the SEC. Copies of CPEX’s filings with the
SEC may be obtained by the methods described above. CPEX cautions
investors not to place undue reliance on the forward-looking
statements contained in this document or other filings with the
SEC.
The statements in this document reflect the expectations and
beliefs of CPEX’s management only as of the date of this document
and subsequent events and developments may cause these expectations
and beliefs to change. CPEX undertakes no obligation to update or
revise these statements, except as may be required by law. These
forward-looking statements do not reflect the potential impact of
any future dispositions or strategic transactions, including the
proposed transaction with FCB, that may be undertaken. These
forward-looking statements should not be relied upon as
representing CPEX’s views as of any date after the date of this
document.
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