Terms of the Merger
The Boards of Directors of Shire and BioChem have unanimously approved a definitive Merger Agreement. The summary terms of the Merger are as follows:
-- The Merger will be effected by way of the Arrangement, pursuant to
which BioChem Shareholders will have the opportunity to exchange their
BioChem Shares for new Shire Shares or new Shire ADSs. The Arrangement
is intended to be accounted for as a pooling of interests for financial
reporting purposes under US GAAP.
-- It is also intended that, under the Merger Agreement, BioChem
Shareholders resident in Canada will also have the opportunity to elect
to dispose of their BioChem Shares in return for new Shire Exchangeco
Shares on a tax deferred or roll-over basis for Canadian income tax
purposes.
-- The Shire Exchangeco Shares will be exchangeable for up to five years,
at each Shire Exchangeco shareholder's option, for new Shire Shares on
a one-for-one basis or for new Shire ADSs on a one-for-three basis. A
Shire Exchangeco Share will provide a holder with a security having
economic and voting rights which are virtually identical to those
attaching to a Shire Share.
-- The exact exchange ratio of new Shire Shares for BioChem Shares, which
will be subject to a collar mechanism, will be based on the average
price of a Shire ADS during the 15 trading days ending on the third
trading date prior to the Closing (the "Average Shire ADS Price").
-- The collar provides a fixed value of stock consideration provided the
Average Shire ADS Price at Closing is between US$47.20 and US$70.80.
In such circumstances, each BioChem Share will be exchanged for
approximately US$37 worth of Consideration Shares.
-- In the event that the Average Shire ADS Price is less than or equal to
US$47.20, each BioChem Shareholder will receive 0.7839 Shire ADSs for
each BioChem Share. In the event that the Average Shire ADS Price is
greater than or equal to US$70.80, each BioChem Shareholder will
receive 0.5226 Shire ADSs for each BioChem Share.
-- Based on an Average Shire ADS Price equal to the closing price of a
Shire ADS on 8 December 2000 (the last trading day prior to this
announcement) of US$51-9/16, and on a fully diluted basis, Shire
Shareholders would be interested in approximately 53% and BioChem
Shareholders approximately 47% of the company going forward.
-- On this basis, the merger offer would represent a premium of 39.6% over
the closing price of US$26.5 per BioChem Share on 8 December 2000 and a
premium of 51.0% over the average closing price of BioChem Shares for
the last 10 trading days prior to this announcement.
-- The Merger Agreement contains non-solicitation provisions as well as
mutual break fees payable in certain specified circumstances. In
addition, BioChem has granted to Shire an option to subscribe for cash,
in certain specified circumstances, newly issued BioChem Shares
equivalent to up to 19.9% of BioChem existing issued shares.
-- The Merger is contingent upon, among other conditions, the approval of
Shire and BioChem Shareholders and the admission of the new Shire
Shares, to be issued pursuant to the Merger, to the Official List and
to trading on the London Stock Exchange.
-- The Directors of Shire, who have received financial advice from
Deutsche Bank, have resolved unanimously to recommend Shire
Shareholders to vote in favour of the Merger. In giving advice,
Deutsche Bank has placed reliance on the Directors of Shire's
commercial assessment of the Merger. The Directors of BioChem, who
have been advised by Chase H&Q and Merrill Lynch, unanimously recommend
BioChem Shareholders to vote in favour of the Merger.
New Shire Directors
It is anticipated that Dr Francesco Bellini, the Honourable James A. Grant and Gerard Veilleux will join the board of the enlarged company in non-executive capacities. Dr James Cavanaugh will remain as Chairman of the enlarged company and Mr Stahel, Mr Russell and Dr Totten will continue in their capacities with the enlarged company as Chief Executive, Group Finance Director and Group R&D Director respectively.
Dr. Bellini was a co-founder of BioChem in 1986 and is the company's current Chairman and Chief Executive Officer. Dr. Bellini received a B.Sc. in chemistry from Loyola College in Montreal in 1972, and a Ph.D. in organic chemistry from the University of New Brunswick in 1977.
James Grant, a Director of BioChem since 1986, is a partner with the law firm of Stikeman, Elliot in Montreal. Mr. Grant, who also sits on the boards of several other prominent Canadian corporations, attended McGill University receiving a B.A. in arts in 1958 and a B.C.L. in law in 1961.
Gerard Veilleux joined the BioChem Board in 1999. He is President of Power Communications Inc. and Vice-President of Power Corporation, a diversified management and holding company. Mr. Veilleux is a director of several public and private companies as well as a member of the Board of Governors of McGill University. He has a Master's degree in public administration from Carleton University and a Bachelor of Commerce from Laval University.
Financial Information
Shire will continue to report primarily under US GAAP. Shareholders may elect to receive full UK GAAP accounts in addition to US GAAP accounts. It is intended that the Merger will be accounted for as a pooling of interests under US GAAP. Under UK GAAP, the Merger will be accounted for as a purchase.
Under US GAAP, the combined unaudited pro forma profit and loss account of Shire and BioChem for the year ended 31 December 1999 is as follows:
Pro forma Information
Shire BioChem Total Growth
$000 $000 $000 '99 v '98
Revenue 401,532 185,694* 587,226 30%
Cost of sales (93,475) (9,573) (103,048) --
R&D (77,503) (60,251) (137,754) (47%)
Selling & G&A (130,855) (17,781) (148,636) (22%)
EBITDA 99,699 98,089 197,788 50%
Depreciation
& amortisation (28,598) (5,574) (34,172) (14%)
Operating income 71,101 92,515 163,616 61%
Interest receivable 7,349 5,066 12,415 (5%)
Interest payable (9,742) (1,902) (11,644) (75%)
Other, net (475) 16,098 15,623 120%
Income before taxes,
APB 25 charge
& exceptionals 68,233 111,777 180,010 536%
Income taxes (16,062) (6,500) (22,562) (179%)
Net income from
continuing operations
pre APB 25 charge
& exceptionals 52,171 105,277 157,448 679%
(Loss) from
discontinued
operations,
net of tax -- (11,946) (11,946) (904%)
Net income before
APB 25 charge
& exceptionals 52,171 93,331 145,502 665%
Exceptional items (135,236) -- (135,236) nm
APB 25 charge (11,933) -- (11,933) (119%)
Net (loss)/income (94,998) 93,331 (1,667) (112%)
* Includes CliniChem revenue of $49,296k
The financial information relating to Shire contained in this announcement does not constitute Shire's statutory accounts within the meaning of section 240 of the Companies Act. Statutory accounts for the year ended 31 December 1999 have been delivered to the Registrar of Companies of England and Wales. Arthur Andersen, Shire's auditors, have made a report on them under section 235 of the Act and such report was not qualified and contained no statement under section 237 (2) or (3) of the Act.
The impact of the Merger on Shire's earnings per share will depend on the number of Consideration Shares to be issued pursuant to the Merger. With opportunities for synergies resulting from the Merger, the Directors of Shire expect it to be earnings accretive for Shire's earnings in the first full year. However, a substantial one-time restructuring charge is expected at the time of Closing.
Litigation
BioChem, together with GlaxoWellcome, its partner in the commercialisation of 3TC and Zeffix, is a defendant in certain patent litigation brought against them by Emory University regarding patent infringement of US sales of lamivudine. The Directors of Shire believe that the US Patent Office may deliver its ruling in the first half of 2001 and possibly prior to the Closing. On the basis of all facts and information disclosed by BioChem to Shire as at the date of the Merger Agreement, the outcome of the proceedings instituted by Emory University in the United States would not, for the purposes of the Agreement, be considered to have a material adverse change on BioChem. Consequently, such ruling should not itself cause or permit Shire to terminate the Merger Agreement. With advice from external counsel, the Directors of Shire have assessed the probability of receiving such an adverse ruling and have taken into account such considerations in agreeing to the economic and contractual terms of the Merger.... |
