Amrad's letter to shareholders: reject Circadian proposal

Amrad Corporation (ASX: AML) has issued a letter urging shareholders to reject a proposal to oust three of its directors.

The embattled company, whose share price has plummeted 43 cents - or 37 per cent - in little more than a month, has told shareholders the resolution put forward by a subsidiary of major stakeholder Circadian Technologies was not in their best interests.

Under the proposal, Circadian subsidiary Fibre Optics has called for a general meeting to remove Amrad chairman Prof John Mills and non-executive directors Helen Cameron and Jeremy Curnock Cook.

The company, which holds 19.3 per cent of Amrad, has nominated the replacement directors to be Ian Davis and Robert Moses, with Olaf O'Duill put forward as a replacement chairman.

In its letter, Amrad's existing board said it had analysed the proposal carefully and concluded that it was not in the best interests of shareholders, "large or small".

"If its proposal were successful the three Fibre Optics nominees would constitute 50 per cent of the Amrad board, and if one of those nominees became chairman, they could control the board," the letter warned.

The correspondence explained that in the past six months the company had substantially restructured the board and the management team, with the retirement or resignation of five directors and the introduction of two new directors.

It said Amrad now comprised "an excellent mix of skills, encompassing biomedical science, international business, commercial and financial experience" adding that incumbent chairman Mills had more than 30 years of international experience in the conduct, management and commercialisation of biomedical research and development.

The company expressed concern at Circadian's approach claiming the proposal would give 50 per cent board control to a company that held less than 20 per cent of Amrad's shares.

"Normally, a party wishing to take control of a company would make an offer of cash and/or scrip, including a premium for control," the letter said.

"Circadian has not offered any such consideration to Amrad shareholders."

Speaking to Australian Biotechnology News Mills voiced fears that three Circadian nominated directors could sway Amrad away from its business model.

"I agree that by corporate law a director has to act in the interests of the company for which he's sitting in the boardroom," Mills said.

"But I think it would be difficult to assume that given two choices the Circadian nominees might not bend a bit towards that company."

Circadian executive director Graeme Kaufman said it was a pity Amrad was "still pursuing this line".

"I am puzzled Amrad is pushing that given the law is quite clear...it's totally not an issue about control," Kaufman said.

"If we wanted to move to control the company we would be in there buying it up.

"All we want to do is to see our investment realise the value locked up in Amrad and we want to augment the board with the people we have put up."

He said Circadian had toyed with the idea of snapping up discounted shares in Amrad, but had decided against it.

Kaufman said that while Circadian still hoped to resolve the problem without holding the proposed May 26 general meeting, it was looking "highly unlikely".

Amrad said it would again write to shareholders by April 16 to set out details of the proposed resolution, together with its response and recommendations.