Biogen odds high on Facet war; Peet's unlikely to win deal; Kraft's takeover chances improve

By Cristal Cody

Tupelo, Miss., Dec. 15 - Biogen Idec Inc. said Tuesday the company is prepared to start a proxy fight to unseat the board of directors of Facet Biotech Corp. as a way to push through its $17.50-a-share cash takeover attempt.

The company's chances are good as long as Facet's stock trades below $17.50 a share, an analyst told Prospect News.

Also on Tuesday, Peet's Coffee & Tea, Inc. said its offer to acquire Diedrich Coffee, Inc. cleared the antitrust waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Peet's extended the offer of $26.00 a share in cash and stock, which is lower than the rival bid from Green Mountain Coffee Roasters, Inc. that was accepted by Diedrich's board, in the hopes that Green Mountain's proposal will meet with significant competition hurdles.

Those hopes are banking on steep odds, one analyst said Tuesday.

In other situations on Tuesday, Kraft Foods Inc. seemed more determined after Cadbury plc's formal rejection of its $16.5 billion takeover offer a day earlier.

Without an official rival bid, Kraft's chances for completing the deal are increasing, an analyst told Prospect News.

Meanwhile, equities slipped on Tuesday. The Dow Jones Industrial Average lost 49.05 points, or 0.47%, to close at 10,452.00.

The Standard & Poor's 500 index fell 6.18 points, or 0.55%, to 1,107.93, and the Nasdaq Composite index shed 11.05 points, or 0.50%, to end at 2,201.05.

Biogen chooses Facet war

Biogen said in a statement Tuesday that it will run a proxy contest to replace Facet directors if a majority of Facet's shares are tendered in its $493 million offer, which is scheduled to expire at midnight ET on Wednesday.

Biogen also reiterated that the bid is the final offer from the company.

A Biogen spokesman told Prospect News on Tuesday that the company has cleared all regulatory hurdles for a combination.

A proxy contest is the "cheaper route to go," over increasing the bid, Hamad Khorsand, an analyst with BWS Financial Inc., said Tuesday. "As long as the stock stays under $17.50, Biogen has a pretty good chance of being successful with a proxy fight."

Facet's board has said the offer does not reflect the company's value or its prospects. Facet also said it has entered into due diligence discussions with other parties and will seek alternative proposals.

Some buzz has erupted over a potential new drug in Facet's lineup.

Khorsand doesn't think the new drugs from Facet will matter much.

"It's still early on in the process," he said. "You can't set a high valuation on those drugs. You need clinical data."

Although Facet has said it is seeking other proposals, no other bidders are expected.

That's because Cambridge, Mass.-based Biogen has partnered with Redwood City, Calif.-based Facet since 2005 to develop cancer and multiple sclerosis drug treatments.

"It doesn't make any financial sense for anyone else to make an offer on this," Khorsand said. "Biogen has the main license agreement on their lead drug."

Facet shares lost 31 cents, or 1.82%, to close at $16.75 on Tuesday.

Biogen's stock rose 56 cents, or 1.15%, to $49.43.

Peet's hopes for antitrust help

With the acquisition of Diedrich, Green Mountain would control a majority of the licensees for the popular Keurig coffee maker and its single-serve K-cup portions.

Waterbury, Vt.-based Green Mountain has offered $290 million, or $35.00 a share, in cash to acquire the Irvine, Calif.-based specialty coffee distributor and roaster.

Diedrich had originally agreed in November to a transaction with Peet's at $26.00 a share in cash and stock until Green Mountain increased the bidding.

Emeryville, Calif.-based Peet's said in a statement on Tuesday that it extended its exchange offer to Jan. 29. The offer was scheduled to expire on Tuesday.

Peet's said that as of Monday, about 5,126 shares of Diedrich had been tendered in its offer.

Despite Peet's assertions about competition concerns, analysts do not see any regulatory issues with Green Mountain's offer.

One analyst told Prospect News on Tuesday that competition issues are unlikely.

"My sense is no. Coffeemakers and coffee itself is a large and pretty fragmented market at retail," the analyst said.

Green Mountain said that it expects to close the transaction in early 2010.

The proposal includes a graduated reverse breakup fee that starts at $8.52 million if the deal is terminated before Feb. 15.

Diedrich shares closed off 9 cents, or 0.26%, at $34.75 on Tuesday.

Green Mountain's stock fell 22 cents, or 0.33%, to close at $65.93.

Shares of Peet's dropped 82 cents, or 2.48%, to $32.26.

Kraft unfazed

Kraft said Tuesday that a union with Cadbury would offer a unique fit. Kraft also announced that its offer received U.S. antitrust clearance.

On Monday, Cadbury published its formal "defense document" to Kraft's bid, valued at 727 pence a share.

The British confectioner has rejected Kraft's offer of 300p in cash and 0.2589 of a share of Kraft per Cadbury share.

Kraft said in the statement on Tuesday that Cadbury shareholders are "being asked to choose between having the value certainty and upside potential of the offer versus taking the risk of continuing to own Cadbury shares in the absence of any offer."

Cadbury on Monday raised its target growth prospects and confirmed that it has received indications of interest from other parties. Both Hershey, Pa.-based Hershey Co. and private Italy chocolate maker Ferrero International SA have shown interest in a deal.

"There have been a lot of rumors around the Hershey thing but until that emerges, it's hard to imagine why Kraft would really raise its bid," an analyst told Prospect News. "Without a competing bid, the odds of success of the transaction are probably pretty high at this point."

Shares of Northfield, Ill.-based Kraft closed down 14 cents, or 0.52%, at $26.83 on Tuesday.

Cadbury's stock fell 3.5p, or 0.44%, to 791.5p.

Mentioned in this article:

Biogen Idec Inc. Nasdaq: BIIB

Cadbury plc London: CBRY

Diedrich Coffee, Inc. Nasdaq: DDRX

Facet Biotech Corp. Nasdaq: FACT

Green Mountain Coffee Roasters, Inc. Nasdaq: GMCR

Hershey Co. NYSE: HSY

Kraft Foods Inc. NYSE: KFT

PDL BioPharma, Inc. Nasdaq: PDLI

Peet's Coffee & Tea, Inc. Nasdaq: PEET

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