Globe & Mail
Monday May 24, 2004
'Bitter fight' predicted in looming Dimethaid Research proxy battle
Dissidents claim 20% of stock committed
By LEONARD ZEHR
BIOTECHNOLOGY REPORTER
Monday, May 24, 2004 - Page B3
A group of dissident shareholders of Dimethaid Research Inc. figures it has commitments for more than 20 per cent of the company's stock going into a proxy battle to gain control of the drug developer's board, says the group's leader.
"I expect this is going to be a bitter fight," said Daniel Chicoine, who has been earmarked to replace Rebecca Keeler as chief executive officer of Dimethaid, if the dissident challenge succeeds. "Her style in the past has been not to mince words and she has been at this since 1990, so she's entrenched."
Mr. Chicoine's group has requested a special meeting of shareholders to vote on a new board, and the company, which on Friday rejected the dissidents' demands to replace Ms. Keeler, is expected to announce a date early next month.
The first salvo in the fight was fired by the Markham, Ont.-based company Friday afternoon when it announced plans at the close of trading to privately sell up to 8.6 million special warrants at 58 cents apiece. Assuming conversion into common stock of share purchase warrants attached to the $5-million issue, the sale would dilute existing shareholders by almost 23 per cent, Mr. Chicoine said.
Shares of Dimethaid closed at 62 cents Friday on the Toronto Stock Exchange, down from $1 four weeks ago, reflecting increased "short selling," sources say.
On Thursday, the stock fell 16 per cent in heavier-than-normal volume of almost 2.1 million shares.
According to Dimethaid's "term sheet," the company had been trying to privately sell units, consisting of one common share and one warrant, at a 20-per-cent discount to the market price of its stock on the day prior to pricing the issue.
"The dilution, at 23 per cent, was just less than the 25 per cent that requires shareholder approval," Mr. Chicoine said.
The group plans to meet this week to review the financing and determine its next steps. Dimethaid officials could not be reached for comment.
The company said in a statement that it gave the dissidents until last Wednesday "to offer evidence that it could raise sufficient capital for the company. As of the deadline, the group was unable to demonstrate such ability."
The dissidents counter that they were given two days to raise money and had obtained conditional financing commitments, subject to due diligence. "We couldn't commit to anything because we didn't have access to the company's records," Mr. Chicoine said.
As of Feb. 29, 2004, Dimethaid had $3.4-million (U.S.) in cash on its balance sheet, down from $6.2-million at Nov. 30, 2003.
"If you assume the same [rate of spending], they'll be out of money soon," Mr. Chicoine said.
Dimethaid's Pennsaid cream for pain of osteoarthritis has been cleared for sale in Canada, the Caribbean, and a number of European countries.
In the fiscal third quarter ended Feb. 29, the company posted revenue of $1.4-million.
Mr. Chicoine said Dimethaid's goal must be to better promote the licensing of Pennsaid and get the product to market as fast as possible in as many markets as possible.
If the proxy challenge is successful, he plans to resign from his current position as vice-president of finance and corporate development for Magna International Inc.'s Cosma Group.
Other proposed nominees for the dissident slate of directors are:
Jeffrey Chisholm, a former vice chairman, personal and commercial client group, for Bank of Montreal.
David Copeland, a former chief financial officer of Magna.
Anthony Dobranowski, vice-chairman of Tesma International Inc., a member of the Magna group of companies.
Joe Heffernan, chairman of Rothmans Inc. and Clairvest Group Inc.
Jacques Messier, a former CEO of generic drug maker Novopharm Ltd.
Klaus von Lindeiner, a German business executive and nominee of Friedrich Kuhne, who sold Oxo Chemie AG to Dimethaid several years ago and holds an estimated 8-per-cent stake in Dimethaid. |
