Mayne Pharma this morning confirmed the takeover rumours by announcing an agreed bid by US pharmaceuticals firm Hospira at $4.10 a share, valuing Mayne at $2.6 billion, the same amount as Hospira’s annual sales.

Of more interest was Mayne’s disclosure that the board has been actively auctioning off the company for an undisclosed period that looks rather like its entire life since being spun off in November – and all without informing shareholders. Shareholders who sold out of the company when it was dog-like might wonder if they’ve been well served by the board’s secrecy given that they’ve missed out on the takeover price that is 50% premium on the stock’s average share price.

Chairman Peter Wilcox said the board felt one unsolicited proposal had to be tested further, which meant an undisclosed number of “interested parties” were invited to conduct due diligence – an auction with Hospira emerging with the highest bid.

Was the market informed that the company was on the block? Obviously not. The secret was reasonably well kept until the last minute – the offer price is 37% above the average price over the five days before the shares were suspended. If you used to be a Mayne Pharma shareholder, you might well feel you’d been dudded by the board – and you’d be right. You certainly wouldn’t have sold your shares in the last month if you knew there was a bunch of “interested parties” conducting due diligence.

The board has appointed the leader of the usual suspects, Grant Samuel and Associates, as its “independent” expert to assess the bid. I am yet to see Grant Samuel come up with an assessment that does anything other than go along with the commissioning board’s position, so expect a tick there. With the usual caveat of there being no higher bid, the board recommends shareholders vote for the $4.10 Hospira offer.

What happens next? The market will speculate about whether someone else might want to pay more, someone at Slater and Gordon will wonder if there are grounds for a class action by former shareholders and cynical souls will consider what sort of takeover payouts Mayne senior executives might pick up and whether Mayne directors and senior management effectively had insider knowledge ensuring they didn’t sell any shares they owned in recent months.

Peter Fray

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