Progen Pharmaceuticals, Avexa terminate merger

By Lisa Kerner

Charlotte, N.C., March 9 - Progen Pharmaceuticals Ltd. is paying a A$500,000 break-up fee to Avexa Ltd. after the companies mutually terminated their merger agreement, it was announced on Monday.

According to Progen, it failed to garner sufficient shareholder support for the transaction.

Progen said to satisfy those shareholders seeking a larger return on capital than offered in the transaction with Avexa, the company proposed a voluntarily buyback of A$40 million, or 60%, of Progen shares for A$1.10 per share.

If the buyback is approved by Progen shareholders at the annual meeting on April 21, shareholders will have the option to maintain their shareholding, sell their shares for A$1.10 each or sell part of their shares in the buyback and maintain part of their shareholding in Progen.

Progen cancelled its previously announced A$20 million buyback that was part of the Avexa transaction.

"The merger between Progen and Avexa certainly had the potential to give shareholders a strong return on investment in excess of [A]$2.03 to [A]$3.18 per share based on a discounted cash flow valuation of ATC [Avexa's lead compound] alone," Progen chief executive officer T. Justus Homburg said in a news release.

"Unfortunately, we have a voting block of shareholders that are not interested in holding biotechnology shares and instead would like to see their investment realized via a cash return as soon as possible," Homburg added.

"While we believed the proposed merger with Progen would have been beneficial to Avexa shareholders, it is important to note that the Avexa assets, in particular ATC, were largely expected to drive the combined entity going forward," Avexa chairman Nathan Drona said in a company statement.

In March, Progen investor Cytopia Ltd. urged fellow shareholders to vote against the proposed Progen/Avexa merger at the company's general meeting on March 11, which Progen has since cancelled.

As previously reported, a group of shareholders led by Cytopia, a Melbourne, Australia, biotechnology company, also requisitioned a special meeting be held, which Progen scheduled for March 27.

At the second meeting, Cytopia wants shareholders to vote on two proposals:

• A full share buyback offer of A$1.10 per share accessible to all Progen shareholders; and

• Removal of the current board and appointment of three new independent directors.

Progen's board of directors is recommending that shareholders vote against all resolutions on March 27.

Brisbane, Australia-based Progen is a biotechnology company committed to the discovery, development and commercialization of small-molecule pharmaceuticals primarily for the treatment of cancer.

Avexa is a Victoria, Australia-based biotechnology company with a focus on discovery, development and commercialization of small molecules for the treatment of infectious diseases.

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