Dr. Phillip Frost, the chairman of both Prolor Biotech Inc. (AMEX: PBTH; TASE: PBTH) and Opko Health Inc. (NYSE: OPK) has the right to vote on the merger of the two companies on August 28, states Prolor in the summons to the general shareholders meeting which will vote on the merger. Each company will hold a separate vote on the merger. Frost is also chairman of Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA).
Frost is the biggest shareholder in both Prolor and Opko, owning 26.5% of the former and 50% of the latter. In contrast to Israeli law, under US law, Frost and his associates who are parties at interest in the deal are not banned from voting on it. This means that the vote by Opko shareholders is essentially a done deal. As for Prolor, the parties will have to secure a third of the independent shareholders to approve the merger.
"Although Frost initiated the merger, he was not personally involved in the negotiations, which were managed by a team of external directors of each party. The law therefore allows Frost to vote as an ordinary shareholder," Prolor president Shai Novik.
The description of the negotiations in the proxy statement, which the companies published for the merger, Frost proposed the merger and the price, which were not changed during the negotiations. Prior to this proposed merger, Prolor was in acquisition talks with Teva, but the parties could not agree on terms.
Prolor has a market cap of $442 million, and Opko has a market cap of $2.5 billion. Under the merger terms of 0.9951 Opko shares for each Prolor share, the deal gives Prolor a share price of $7.64, a 9.6% premium on Friday's closing price of $6.96, and a 30% premium on its share price when the merger was announced.
Frost has bought Opko shares since the merger was announced. He bought shares in the company in previous years, but picked up the pace following the announcement, helping boost the share price. This also affected the company value of Prolor for the deal, which will be through a share swap. The purchases also boosted Frost's stake in Opko to over 50%, which means that he can decide the vote on the merger by himself.
At the same time, Frost also bought shares in Prolor. "I am buying Opko because it's a good investment and Prolor because it's like buying Opko at a discount," he says.
In the proxy statement, Opko says that, after the merger with Prolor, it is considering a listing on the Tel Aviv Stock Exchange (TASE). It is a diversified life sciences company with diagnostic and drug development operations, most of which it acquired from third parties. It posted a loss of $34 million on $31 million revenue for the first quarter of 2013, compared with a loss of $8.6 million on $8.7 million for the corresponding quarter of 2012.
Besides Frost, Opko has an Israeli connection through two pharmaceutical manufacturing companies which it acquired for small amounts: Nesher-based FineTech Pharmaceutical Ltd. and Rehovot-based SciGen Israel Ltd.
Prolor is developing delayed-release injectable drugs. Its flagship product is a longer acting human growth hormone, which can be delivered once a week or every other week, instead of daily. The company is about to begin a Phase III clinical trial (multicenter efficacy trial) on the drug.
Published by Globes [online], Israel business news - www.globes-online.com - on July 28, 2013
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