Biotechnology Value Fund (BVF) has increased its tender offer for Avigen Inc (NASDAQ:AVGN) from $1.00 per share to $1.20 per share contingent on the election of BVF’s nominees to the board of AVGN.
We’ve been following AVGN (see archived posts here) because it’s a net cash stock (i.e. it’s trading at less than the value of its cash after deducting all liabilities) and specialist biotechnology investor BVF has been pushing it to liquidate and return its cash to shareholders. MediciNova Inc (NASDAQ:MNOV) has made an offer for AVGN that we think represents a clever way for AVGN’s stockholders to receive cash equivalent to that which they would receive in a liquidation (less $7M to be paid to MNOV) with the possibility for “an extraordinary, uncapped return” if MNOV is successful post-merger. The stock is up 77% from $0.65 to close at $1.15 Friday. We estimate AVGN’s net cash value to be $37M or $1.24 per share (BVF estimates $1.20 per share). The net cash estimate does not take into account AVGN’s AV411 assets and program, which could be worth considerably more, perhaps as much as $5M to $20M or between $0.15 or $0.60 per share.
The text of BVF’s press release is set out below:
BVF Acquisition LLC Increases Tender Offer Price for Avigen, Inc. to $1.20 Per Share
Friday March 20, 2009, 8:00 am EDT
Why does Avigen refuse to guarantee $1.20 per share in cash?
NEW YORK, March 20 /PRNewswire/ — BVF Acquisition LLC (the “Purchaser”), an affiliate of Biotechnology Value Fund L.P. (“BVF”), which has commenced a cash tender offer to purchase all of the outstanding shares of Avigen, Inc. (Nasdaq: AVGN – News; “Avigen”), announced today that it is increasing its cash tender offer price from $1.00 per share to $1.20 per share. The offer is currently scheduled to expire at 6:00 p.m., New York City time, on Friday, April 3, 2009. The key condition to the offer is the election of BVF’s nominees.
BVF is offering all stockholders $1.20 per share in cash. Why won’t Avigen do the same? Without this protection, how can Avigen be trusted?
BVF has repeatedly called on the Board to guarantee downside protection for stockholders, rather than gambling the remaining stockholder money. This Board has repeatedly refused to commit to proceeding only with a transaction that offers quantifiable downside protection, in cash, of approximately the Company’s liquidation value. The MediciNova merger provides for this; why not Avigen directly? The Board’s refusal to do so should be cause for great concern and suspicion. For example, is Avigen about to give away millions of dollars in “break-up” fees in a flawed, unprotected merger, with full knowledge that stockholders oppose it? BVF has offered stockholders the option to tender their shares for $1.20 per share in cash or participate with BVF in the future of Avigen. BVF’s objective is to protect and maximize its investment in Avigen stock; management’s incentive is to maximize salaries and fees, and to trigger their multimillion-dollar “golden parachute” agreements.
To tender your shares and receive $1.20 per share in cash, BVF’s nominees must be elected. Importantly, should stockholders fail to remove the current Board and replace them with BVF’s stockholder-oriented representatives, the tender offer will expire and no shares will be accepted. Is it possible that Avigen’s stock price could fall significantly without the support of the outstanding BVF tender offer?
We urge stockholders to vote the GOLD proxy to remove the current directors and elect BVF’s stockholder-oriented nominees. BVF believes its nominees offer the best opportunity for stockholders to protect their investment in Avigen. All stockholders are encouraged to act now to protect their investment and vote the GOLD proxy card today.
MacKenzie Partners, Inc. is the Information Agent for the tender offer and any questions or requests for the Offer to Purchase and related materials with respect to the tender offer or the special meeting may be directed to MacKenzie Partners, Inc.
[Full Disclosure: We have a holding in AVGN. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only. Do your own research before investing in any security.]
I just picked up a few of these shares on Friday to try to tender for a quick profit.
You can buy shares at a pretty substantial discount to $1.20 right now (considering the short amount of time involved).
LikeLike
You got it. There’s a nice little arb in AVGN if you like BVF’s chances at the meeting. Given BVF’s holding and a few other holdings sympathetic to BVF, they’ve got to be a good chance of tipping the board.
LikeLike