Portfolio news 2012 Proximagen Group plc - Offer for Proximagen Group plc 13 Jun 2012

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT SECURITIES LAWS OF SUCH JURISDICTION

13 June 2012

RECOMMENDED OFFER

for

PROXIMAGEN GROUP PLC

by

USL Pharma International UKLIMITED
a wholly-owned subsidiary of UPSHER-SMITH LABORATORIES, INC.

to be effected

by means of a Scheme of Arrangement

under Part 26 of the Companies Act 2006

Summary

·      The Board of Proximagen and the Board of Upsher-Smith are pleased to announce that they have reached agreement on the terms of a unanimously recommended offer by USL, a wholly-owned subsidiary of Upsher-Smith, for the entire issued and to be issued share capital of Proximagen (other than shares held by Upsher-Smith).  It is intended that the Acquisition be implemented by means of a court-sanctioned scheme of arrangement under Part 26 of the Companies Act 2006.

·      Under the terms of the Acquisition, Proximagen Shareholders will be entitled to receive:

for each Proximagen Share:320 pence in cash; and

up to a further 192 pence in either cash or Loan Notes by way of a contingent value right (a CVR)

·      The Acquisition excluding the CVRs values Proximagen's fully diluted share capital at approximately £223.0 million ($346.7 million) on the basis of a fully diluted share capital of 69,689,794 Proximagen Shares.

·      The Acquisition including the CVRs potentially values Proximagen's fully diluted share capital at up to approximately £356.8 million ($554.7 million) on the basis of a fully diluted share capital of 69,689,794 Proximagen Shares.

·      The Acquisition represents an immediate cash premium, excluding the CVR, of approximately:

·     16.4 per cent. to 275 pence, being the Closing Price per Proximagen Share on 12 June 2012 (being the last Business Day prior to the date of this announcement);

·     50.5 per cent. to approximately 213 pence, being the three month average Closing Price per Proximagen Share up to 12 June 2012;

·     84.6 per cent. to approximately 173 pence, being the six month average Closing Price per Proximagen Share up to 12 June 2012; and

·     21.8 per cent. to the enterprise value of Proximagen on 12 June 2012.

·      Pursuant to the terms of the Acquisition, Proximagen Shareholders will receive one CVR for each Proximagen Share that they hold. The CVR is intended to enable Proximagen Shareholders to share in the future success of two existing Proximagen programs, VAP-1 and PRX00933. Each CVR will entitle Proximagen Shareholders to receive up to a further 192 pence in either cash or in Loan Notes (subject to applicable securities laws) at the election of the Proximagen Shareholder, subject to and in accordance with the terms and conditions of the CVR.

·      The cash consideration payable by USL under the Acquisition will be funded from cash on the balance sheet of the Upsher-Smith Group and new debt facilities arranged by J.P. Morgan Securities LLC, U.S. Bank National Association and Wells Fargo Securities, LLC in the form of a $300 million secured credit agreement to be provided by JPMorgan Chase Bank, N.A., U.S. Bank National Association and Wells Fargo Bank, National Association to Upsher-Smith.  It is not intended that the payment of any interest or other charges in respect of such facility will depend on the business of Proximagen. 

·      It is intended that the Acquisition will be implemented by way of a court-sanctioned scheme of arrangement under Part 26 of the Companies Act 2006 or, if USL elects, a takeover offer (as that term is defined under section 974 of the Companies Act 2006) to Proximagen Shareholders.  The purpose of the Scheme is to enable USL to acquire the whole of the issued and to be issued share capital of Proximagen that Upsher-Smith does not already own.  The Scheme, which will be subject to the Conditions set out in Appendix I to this announcement, will require the sanction of the Court.

·      The Board of Proximagen, which has been so advised by WG Partners, considers the terms of the Acquisition to be fair, reasonable and in the best interests of Proximagen Shareholders as a whole.  In providing financial advice to the Board of Proximagen, WG Partners has taken into account the Board's commercial assessments.  WG Partners is providing the independent financial advice for the purposes of Rule 3 of the City Code and is also acting as financial adviser to the Board of Proximagen.  Accordingly, the Board of Proximagen unanimously recommends that Proximagen Shareholders vote in favour of the resolutions relating to the Acquisition at the Meetings (or in the event that the Acquisition is implemented by way of an Offer, to accept or procure acceptance of such Offer).

·      USL has received irrevocable undertakings from those members of the Board of Proximagen who hold interests in the Proximagen Shares (in respect of themselves and, where relevant, their spouse, civil partner, de facto partner or similar) to vote in favour of the Scheme or to procure that the registered holder votes in favour of the Scheme (or, in the event that the Acquisition is implemented by way of an Offer, to accept the Offer or procure acceptance of the Offer) in respect of their entire beneficial holdings which total 901,256 Proximagen Shares in aggregate representing approximately 1.43 per cent. of Proximagen's issued share capital as at the date of this announcement. 

·      In addition, USL has also received irrevocable undertakings from certain other Proximagen Shareholders, namely Invesco Asset Management, IP Group plc, King's College London, Lansdowne Partners and H. Lundbeck A/S, to vote in favour of the Scheme or to procure that the registered holder votes in favour of the Scheme (or, in the event that the Acquisition is implemented by way of an Offer, to accept the Offer or procure acceptance of the Offer) in respect of their entire beneficial holdings of such shares (or, in the case of Invesco Asset Management, the Proximagen Shares which it manages on a discretionary basis for its clients and, in the case of Lansdowne Partners, as agent for Lansdowne funds) which total 44,552,330Proximagen Shares in aggregate representing approximately 70.58 per cent. of Proximagen's issued share capital as at the date of this announcement. 

·      In aggregate, therefore, USL has received irrevocable undertakings to vote in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the Proximagen General Meeting in respect of a total of 45,453,586 Proximagen Shares, representing 72.01 per cent. of the share capital of Proximagen in issue as at the date of this announcement.  Further details of these irrevocable undertakings are set out in Appendix III to this announcement.

·      The Acquisition will be subject, inter alia, to the satisfaction or waiver of the Conditions set out in Appendix I to this announcement and in the Scheme Document.  Further details of the Scheme will be set out in the Scheme Document which will be posted to Proximagen Shareholders within 28 days of the date of this announcement.

·      Commenting on the Acquisition, Mark Evenstad, the Chief Executive Officer of Upsher-Smith said:

"Upsher-Smith is delighted to announce today's transaction, together with the unanimous recommendation of the Board of Proximagen.  We have been very impressed with the quality and breadth of Proximagen's portfolio of programs, and the commitment and expertise of Proximagen's employees.  Having worked closely with Proximagen as both a commercial partner and a strategic shareholder since 2008, we believe that Proximagen has significant potential and we are excited about the opportunity of bringing new therapies to market that will benefit patients."

·      Commenting on the decision by the Board of Proximagen to recommend the Acquisition, Kenneth Mulvany, the Chief Executive Officer of Proximagen said:

"I am delighted that the Board of Proximagen has been able to unanimously recommend the offer made by Upsher-Smith for Proximagen which potentially values Proximagen at up to £356.8 million and believe that it represents a great opportunity for our shareholders, our staff and our drug development programs.  This deal demonstrates that the UK biotechnology sector can, with supportive investors, bring together scientific excellence and business acumen and generate significant returns for shareholders.  On these terms, the deal returns significant value to our investors who have continually been committed to Proximagen and believed not only in Proximagen's business model but also in the UK's ability to generate commercial returns from great science and innovation.

The strategic fit between Proximagen and Upsher-Smith is particularly complementary and we believe that the Acquisition represents a very good opportunity for Proximagen's portfolio of programs to benefit from the extensive resources of Upsher-Smith and the consequent progress in their development.  Proximagen and Upsher-Smith have been strategic partners since 2008 and, having worked closely with Upsher-Smith for more than four years, I am confident that Proximagen's staff and programs will be in very good hands and have a very bright future in the Enlarged Group."

This summary should be read in conjunction with the following full announcement and the Appendices.  The Acquisition will be subject to the Conditions and other terms set out in Appendix I to this announcement and to the full terms and conditions which will be set out in the Scheme Document.  Appendix II contains bases and sources of certain information contained in this announcement.  Details of irrevocable undertakings received by Upsher-Smith are set out in Appendix III to this announcement.  Illustrative CVR payment calculations are set out in Appendix IV to this announcement.  Certain terms used in this summary and the full announcement are defined in Appendix V to this announcement.

A copy of this announcement will be available, free of charge, subject to certain restrictions relating to persons resident in Restricted Jurisdictions, at Proximagen's website at www.proximagen.com and at Upsher-Smith's website at www.upsher-smith.com by no later than 12 noon (London time) on the Business Day following the date of this announcement.  Neither the contents of Proximagen's website, the contents of Upsher-Smith's website, nor the contents of any other website accessible from hyperlinks on either Proximagen's or Upsher-Smith's website, is incorporated into or forms part of, this announcement.

Enquiries:

Upsher-Smith and USL Mark Evenstad, Chief Executive Officer Tom Burke, Chief Operating Officer	+1 (763) 315 2000
J.P. Morgan Cazenove (Financial adviser to Upsher-Smith and USL) James Mitford Christopher Dickinson	+44 (0) 20 7742 4000
Kovak-Likly Communications (PR adviser to Upsher-Smith) Elizabeth Likly, Principal Bruce Likly, Principal	+1 (203) 762 8833
Proximagen Kenneth Mulvany, Chief Executive Officer James Hunter, Finance Director	+44 (0) 20 7400 7700
WG Partners (Financial adviser to Proximagen) David Wilson Stephen Waterman Karri Vuori	+44 (0) 20 7149 6000
Cenkos Securities plc (Nominated adviser and broker to Proximagen)Bobbie Hilliam (NOMAD) Julian Morse	+44 (0) 20 7397 8900
M:Communications (Media enquiries) (PR adviser to Proximagen) Mary-Jane Elliott Sarah Macleod Hollie Vile	+44 (0) 20 7920 2330 proximagen@mcomgroup.com

This announcement is not intended to and does not constitute or form part of any offer to sell or subscribe for or any invitation to purchase or subscribe for any securities or the solicitation of any vote or approval in any jurisdiction pursuant to the Acquisition or otherwise.  The Acquisition will be made solely pursuant to the terms of the Scheme Document (or, if applicable, the Offer Document), which will contain the full terms and conditions of the Acquisition or to elect to sell shares in connection with the Acquisition, as the case may be), including details of how to vote in respect of the Acquisition.  Any decision in respect of, or other response to, the Acquisition should be made only on the basis of the information contained in the Scheme Document.

This announcement has been prepared for the purpose of complying with English law and the City Code and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws of jurisdictions outside the United Kingdom.

The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom and the United States may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom and the United States should inform themselves about, and observe any applicable requirements.  In particular, the ability of persons who are not resident in the United Kingdom or the United States to vote with respect to their Proximagen Shares in relation to the Scheme at the Meetings, to execute and deliver Forms of Proxy appointing another to vote at the Meetings on their behalf and to execute and deliver the Form of Election, may be affected by the laws of the relevant jurisdictions in which they are located. 

Copies of this announcement and any formal documentation relating to the Acquisition are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in or into or from any Restricted Jurisdiction and persons receiving such documents (including custodians, nominees and trustees) must not mail or otherwise forward, distribute or send them in or into or from any Restricted Jurisdiction.  If the Acquisition is implemented by way of an Offer (unless otherwise permitted by applicable law and regulation), the Offer may not be made directly or indirectly, in or into, or by the use of mails or any means or instrumentality (including, but not limited to, facsimile, e-mail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or of any facility of a national, state or other securities exchange of any Restricted Jurisdiction and the Offer may not be capable of acceptance by any such use, means, instrumentality or facilities.

J.P. Morgan Limited, which conducts its UK investment banking business as J.P. Morgan Cazenove and is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively as financial adviser to Upsher-Smith and USL and for no one else in connection with the matters set out in this announcement and will not be responsible to anyone other than Upsher-Smith and USL for providing the protections afforded to its clients nor for providing advice in relation to the matters set out in this announcement.

Charles Stanley & Co Limited, trading as Charles Stanley Securities and WG Partners, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively as financial adviser to Proximagen and no one else in connection with the matters set out in this announcement and will not be responsible to anyone other than Proximagen for providing the protections afforded to its clients nor for providing advice in relation to the matters set out in this announcement.

Cenkos Securities plc, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as nominated adviser and broker to Proximagen and no one else in connection with the matters set out in this announcement and will not be responsible to anyone other than Proximagen for providing the protections afforded to its clients nor for providing advice in relation to the matters set out in this announcement.

Notice to US investors in Proximagen

The Acquisition relates to the shares of an English company that is a foreign private issuer (as defined under Rule 3b-4 under the US Exchange Act) and is being made by means of a scheme of arrangement provided for under English company law.  A transaction effected by means of a scheme of arrangement is not subject to the tender offer rules or the proxy solicitation rules under the US Exchange Act.  Accordingly, the Acquisition is subject to the disclosure requirements and practices applicable in the UK to schemes of arrangement, including the City Code and the AIM Rules, which differ from the disclosure requirements of United States tender offer and proxy solicitation rules.  Financial information included in this announcement and the Scheme Document has been or will have been prepared in accordance with accounting standards applicable in the United Kingdom that may not be comparable to financial information of US companies or companies whose financial statements are prepared in accordance with generally accepted accounting principles in the United States.  If, in the future, USL exercises the right to implement the Acquisition by way of a takeover offer, such offer will be made in compliance with applicable laws and regulations including US securities laws to the extent applicable. 

No registration statement will be filed with the SEC or any state securities regulators in the US in connection with the Acquisition, and the Loan Notes to be issued pursuant to the terms of the Class I CVRs will not be registered under the US Securities Act.

Neither the SEC, nor any US state securities commission or any other regulatory authority, has passed upon, or endorsed the merits of, or approved or disapproved of the Loan Notes to be issued in connection with the Acquisition, or determined if this announcement is accurate or adequate.  Any representation to the contrary is a criminal offence in the US.

Notice to New Hampshire residents

Neither the fact that a registration statement or an application for a license has been filed under Chapter 421-B of the New Hampshire Revised Statutes Annotated, 1955, as amended, or "RSA," with the state of New Hampshire nor the fact that a security is effectively registered or a person is licensed in the state of New Hampshire constitutes a finding by the Secretary of State that any document filed under RSA 421-B is true, complete and not misleading.  Neither any such fact nor the fact that an exemption or exception is available for a security or a transaction means that the Secretary of State has passed in any way upon the merits or qualifications of, or recommended or given approval to, any person, security or transaction.  It is unlawful to make, or cause to be made, to any prospective purchaser, customer or client any representation inconsistent with the provisions of this paragraph.

Forward-Looking Statements

This announcement contains certain forward-looking statements with respect to USL, Upsher-Smith and Proximagen.  These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts.  Forward-looking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, aim, will, may, would, couldor shouldor other words of similar meaning or the negative thereof.  Forward-looking statements include statements relating to the following: (i) future capital expenditures, expenses, revenues, economic performance, financial conditions, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of the operations of the Upsher-Smith Group or the Proximagen Group; and (iii) the effects of government regulation on the business of the Upsher-Smith Group or the Proximagen Group.

These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of any such person, or industry results, to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements.  These forward-looking statements are based on numerous assumptions regarding the present and future business strategies of such persons and the environment in which each will operate in the future.  All subsequent oral or written forward-looking statements attributable to USL, Upsher-Smith or Proximagen or any persons acting on their behalf are expressly qualified in their entirety by the cautionary statement above.

Nothing contained herein shall be deemed to be a forecast, projection or estimate of the future financial performance of Upsher-Smith, Proximagen or the Enlarged Group following completion of the Acquisition, unless otherwise stated.

Dealing and Opening Position Disclosure Requirements

Under Rule 8.3(a) of the City Code, any person who is interested in one per cent. or more of any class of relevant securities of an offeree company or of any paper offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any paper offeror is first identified.

An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any paper offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a paper offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure. Under Rule 8.3(b) of the City Code, any person who is, or becomes, interested in one per cent. or more of any class of relevant securities of the offeree company or of any paper offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any paper offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a paper offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4 of the City Code). Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

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