BIOGUIDE BRIEF: MESOBLAST MERGER ‘VICTORY FOR ALL’
June 20th 2010 01:55
Wednesday May 12, 2010
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MARC SINATRA’S BIOGUIDE BRIEF: MESOBLAST, ANGIOBLAST
The advantages of the ASX-listed Mesoblast and its unlisted US sister company Angioblast merging into one listed company are numerous and include:
* the ability of the two companies to progress with a coordinated strategy, so that the nature and timing of their combined activities can maximize shareholder value;
* free and full information flow between the companies in an area where, due to its infancy, knowledge attracts a premium value;
* the removal of potential conflicts of interest due to asymmetries in the interests of common shareholders, directors and employees of the two companies;
* a broader product offering, leading to a greater ability to tailor multiple product licencing deals to potential licencees;
* an improved chance of eliciting a takeover offer, as the present arrangement means any buyer would have to launch takeover offers for both companies; and
* consolidation and clarity with respect to intellectual property ownership.
The disadvantages are few, of which the most prominent is that the inability of investors to choose between the two companies may lead to some value loss, while theoretically, there may also be a loss of some specialization benefits.
The merger also offers benefits to each group of shareholders. For example, Mesoblast’s initial public offer and subsequent share price performance has been very strong.
Angioblast shareholders will benefit from the goodwill this has created. Mesoblast shareholders, on the other hand, will become owners of the intellectual property on which the products of their company are based, not just a licencee.
Given the already close nature between Mesoblast and Angioblast, the merger implementation should be about as easy as it can get.
Once completed, the merger will have created a very formidable company structured to benefit all shareholders.
It will also have a truly world class pipeline, with four products in phase II trials.
In my opinion, such a merger represents a victory for shareholders in both companies and Australian biotech, where corporate action is often driven by necessity or a small, but significant, group of shareholders looking for an easy exit.
Marc Sinatra
Analyst
* This brief was derived from a research note contemplating a merger between Mesoblast and Angioblast prepared by Marc Sinatra, under contract, for Lodge Partners. Neither Marc Sinatra nor Biotech Daily editor David Langsam own shares in Mesoblast, yet.
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