CPEX Pharmaceuticals, Inc. (NASDAQ: CPEX) today announced that
its Board of Directors has completed its review of the unsolicited,
non-binding letter (the “Revised Mangrove Letter”) received from
Mangrove Partners (“Mangrove”) on March 16, 2011 revising the terms
of the potential alternative transaction involving a
recapitalization of CPEX (the “Revised Alternative Proposal”) that
Mangrove had originally proposed on March 14, 2011. The Board has
concluded that the merger agreement with FCB I Holdings Inc.
(“FCB”) continues to be the most compelling opportunity for
stockholders to immediately and with certainty realize the maximum
after-tax value for their shares. Accordingly, the Board has
reaffirmed its recommendation that stockholders vote FOR the merger
agreement with FCB.
Consistent with its fiduciary duties and CPEX’s merger agreement
with FCB, the CPEX Board reviewed the Revised Mangrove Letter in
consultation with outside legal counsel and financial advisors and
based on its evaluation believes that engaging in discussions with
Mangrove regarding the Revised Alternative Proposal is not, and is
not reasonably likely to lead to, a transaction that is both
financially more favorable to the CPEX stockholders than the merger
with FCB and reasonably capable of being consummated. In reaching
this conclusion, the Board concluded that the Revised Alternative
Proposal exposes significant credibility and execution
concerns:
Loss of Two Financing Sources Highlights
Credibility and Execution Risks – In the two days since
Mangrove sent its original Alternative Proposal to the CPEX Board,
Mangrove has inexplicably lost two proposed financing sources,
thereby reducing the amount of financing available to fund the
Revised Alternative Proposal. The Board believes that the loss of
these proposed financing sources confirms the Board’s belief that
the proposal is highly suspect and casts doubt on Mangrove’s
ability to successfully execute its Revised Alternative
Proposal.
There is Still No Firm Financing
Commitment and the Financing is Highly Conditional -
There are still no commitment letters from Mangrove’s supposed
financing sources and the Revised Alternative Proposal is subject
to due diligence.
The Board also reiterated that the Revised Alternative Proposal
continues to contain the same flawed valuation assumptions included
in the original Alternative Proposal:
Dividend Amount and Equity Values Remain
Overstated – The Board believes the Revised Alternative
Proposal would not generate sufficient cash to pay the $28.00
special dividend. Mangrove’s terms still do not appear to properly
contemplate expected cash uses such as transaction fees and
expenses, financing fees, Mangrove’s own proposed interest reserve
requirements, the merger agreement termination fee, or any cash
reserves for operations. When properly considered, the special
dividend would be approximately $2.30 per share less than suggested
in Mangrove’s Revised Alternative Proposal. Additionally,
Mangrove’s assumed valuations for the proposed warrants and equity
in CPEX after the recapitalization are overly optimistic and do not
account for the fact that actual debt service consumes all cash
flows for the next six to seven years. Any residual equity value
would be contingent on cash flows being generated beyond that
period.
Value of Notes at Risk of Impairment –
Mangrove’s Revised Alternative Proposal requires that CPEX operate
with a less than appropriate amount of cash on hand. Maintaining
insufficient cash significantly increases the risk of financial
distress and possibly default, which would impair the value of the
Notes in the Rights offering, further diminishing the implied value
of this proposal.
Therefore, the CPEX Board continues to believe that the merger
with FCB is in the best interests of CPEX stockholders and
reaffirms its unanimous recommendation that stockholders vote FOR
the proposal to approve the merger agreement. Stockholders will
receive $27.25 per share in cash for each of their CPEX shares if
the merger is approved. This is a 142% premium over the price of
CPEX shares on January 7, 2010, the day prior to the date a third
party publicly stated its intention to make an unsolicited offer
for CPEX, and a premium of approximately 12% over the 60-trading
day average closing price of CPEX’s shares on the date prior to the
announcement of the merger with FCB.
On March 24, 2011, CPEX is holding a special meeting of
stockholders to vote on the proposal to approve the FCB merger
agreement. Adoption and approval of the transaction requires the
affirmative vote of a majority of the outstanding shares of CPEX
common stock entitled to vote at the special meeting. Therefore,
failure to vote will have the same effect as a vote against the
adoption of the merger agreement. Whether or not stockholders are
able to attend the special meeting in person, stockholders should
follow the instructions on the form of proxy mailed to them and
submit their proxy via the Internet or by telephone, or complete,
sign and date the proxy and return it in the envelope provided as
soon as possible. If stockholders have Internet access, they are
encouraged to record their vote via the Internet. This action will
not limit stockholders’ rights to vote in person at the special
meeting. If stockholders have any questions or need assistance
voting their shares, they should contact MacKenzie Partners, Inc.,
the Company’s proxy solicitor, at (800) 322-2885 or (212) 929-5500
(call collect) or at cpex@mackenziepartners.com.
About CPEX Pharmaceuticals, Inc.
CPEX Pharmaceuticals, Inc. is an emerging specialty
pharmaceutical company focused on the development, licensing and
commercialization of pharmaceutical products utilizing CPEX’s
validated drug delivery platform technology. CPEX has U.S. and
international patents and other proprietary rights to technology
that facilitates the absorption of drugs. CPEX has licensed
applications of its proprietary CPE-215® drug delivery technology
to Auxilium Pharmaceuticals, Inc. which launched Testim, a topical
testosterone gel, in 2003. CPEX maintains its headquarters in
Exeter, NH. For more information about CPEX, please visit
www.cpexpharm.com.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
CPEX has filed with the Securities and Exchange Commission (the
“SEC”) and furnished to its stockholders a definitive proxy
statement in connection with the proposed transaction with FCB (the
“Definitive Proxy Statement”). This communication may be deemed to
be solicitation material in respect of the merger with FCB.
Investors and security holders of CPEX are urged to read the
Definitive Proxy Statement and the other relevant materials (when
they become available) because such materials will contain
important information about CPEX and the proposed transaction with
FCB. The Definitive Proxy Statement and other relevant materials
(when they become available), and any and all other documents filed
by CPEX with the SEC, may be obtained free of charge at the SEC’s
website at www.sec.gov. In addition,
investors and security holders may obtain free copies of the
documents CPEX files with the SEC by directing a written request to
CPEX Pharmaceuticals, Inc., 2 Holland Way, Exeter, NH 03833,
Attention: Chief Financial Officer. Copies of CPEX’s filings with
the SEC may also be obtained at the “Investors” section of CPEX’s
website at www.cpexpharm.com/investor.htm.
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE DEFINITIVE
PROXY STATEMENT AND THE OTHER RELEVANT MATERIALS (WHEN THEY BECOME
AVAILABLE) BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH
RESPECT TO THE PROPOSED TRANSACTION WITH FCB.
CPEX and its directors and executive officers may be deemed to
be participants in the solicitation of proxies from the security
holders of CPEX in connection with the proposed transaction with
FCB. Information about those directors and executive officers of
CPEX, including their ownership of CPEX securities, is set forth in
the Definitive Proxy Statement (filed with the SEC on February 4,
2011) and in the proxy statement for CPEX’s 2010 Annual Meeting of
Stockholders (filed with the SEC on April 9, 2010), as supplemented
by other CPEX filings with the SEC. Investors and security holders
may obtain additional information regarding the direct and indirect
interests of CPEX and its directors and executive officers in the
proposed transaction with FCB by reading the proxy statements and
other public filings referred to above.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
Certain items in this document may constitute forward-looking
statements within the meaning of the “safe harbor” provisions of
the Private Securities Litigation Reform Act of 1995. These
forward-looking statements involve certain risks and uncertainties
that could cause actual results to differ materially from those
indicated in such forward-looking statements, including, but not
limited to: the proposed transaction with FCB; the performance of
CPEX; the benefits of the proposed transaction with FCB and such
other risks and uncertainties as are detailed in the Definitive
Proxy Statement, in CPEX’s Annual Report on Form 10-K filed with
the SEC on March 29, 2010, and in the other reports that CPEX
periodically files with the SEC. Copies of CPEX’s filings with the
SEC may be obtained by the methods described above. CPEX cautions
investors not to place undue reliance on the forward-looking
statements contained in this document or other filings with the
SEC.
The statements in this document reflect the expectations and
beliefs of CPEX’s management only as of the date of this document
and subsequent events and developments may cause these expectations
and beliefs to change. CPEX undertakes no obligation to update or
revise these statements, except as may be required by law. These
forward-looking statements do not reflect the potential impact of
any future dispositions or strategic transactions, including the
proposed transaction with FCB, that may be undertaken. These
forward-looking statements should not be relied upon as
representing CPEX’s views as of any date after the date of this
document.
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