ICOS Corp. (NDAQ:ICOS) is finding itself under increasing pressure after it struck a buyout agreement with Eli Lilly. HealthCor, the fund leading the fight against the takeover, sent yet another letter to management criticising their bidding process and imploring them to break off the agreement. There are several other holders that are also displeased with the agreement and have vowed to vote against the takeover.
According to this
latest 13D/A communication:
"The proposed purchase of ICOS by Eli Lilly is not an arm’s length transaction. The acquisition has not occurred in a market-based, competitive bid process. Therefore, in making its determination of fair value, we believe the Board of Directors must rely upon market-based comparables of similar transactions. We have clearly shown, in our initial communication to you, the flaws and distortions that are contained within the 'Fairness Opinion' provided by Merrill Lynch. Without a competitive bid and without a 'Fairness Opinion' that can be relied upon, the Board of Directors of ICOS is 'flying blind' while trying to assess appropriate value.
Our analysis is based upon objective data sourced from independent investment analysts’ projections as well as from the information provided by the Company in its November 1, 2006 Proxy Statement. As set forth in the following table, since the announcement of the proposed merger with Eli Lilly, three additional transactions have been announced in the relevant healthcare universe. These transactions are all at premiums significantly higher than the premium in the Eli Lilly/ICOS transaction, as currently proposed. The Genentech, Inc. purchase of Tanox, Inc. is particularly important as there is an ongoing partnership on the target’s lead commercial product, Xolair. While ICOS’ management might believe that ICOS is a 'captive target' for Eli Lilly and therefore unable to generate a fair price, the existence of a partnership did not prohibit Tanox, Inc. or Genentech, Inc. from agreeing on a fair price." (Read More)
Table
Merck (NYSE: MRK) - Sirna Therapeutics Inc. (Nasdaq: RNAI) 101.6%
Abbott Laboratories (NYSE: ABT) - KOS Pharmaceuticals Inc. (Nasdaq: KOSP) 55.7%
Genentech Inc. (NYSE: DNA) - Tanox Inc. (Nasdaq: TNOX) 46.6%
Finding comparable transactions is a very common way of valuing a business and HealthCor has compiled this data along with a fundamental analysis of the company to come up with a value of "well in excess of" $40 per share. Meanwhile, the current buyout stands at just $32 per share. This stock is definitely one to
keep an eye on as the voting date of December 19, 2006 draws closer.
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