Biota braces for showdown with 'corporate rationaliser'

The scene has been set for a possible showdown next month between the board of drug discovery company Biota Holdings and Perth businessman Farooq Khan.

Following an inconclusive exchange of views last week, the two sides seem set to collide at Biota's annual general meeting on November 1 in Melbourne.

Khan is seeking two seats on Biota's board after increasing his stake in it to 8.025 per cent through his company Bigshop.com.au.

After a meeting with the board last week, talks between the two sides were "in limbo" Khan told Australian Biotechnology News today.

According to Biota chairman John Grant, Khan used the meeting early last week to "put forward his points of view verbally" including a request for two board seats. He gave the board until close of business last Friday to reply.

"We have asked him a number of questions in writing which would help the board make a proper assessment of his proposals," Grant said.

Today Khan characterised the board's reply as unhelpful and had left negotiations "in a state of limbo". He said he was attempting to make further contact "to determine where they are at."

Khan, who has been labelled a corporate raider, said he preferred the term corporate rationaliser.

"We are not there to asset strip," he said. "We see Biota has some valuable assets that we think are worth a lot more than what the market says. We want to join the board in order to increase the value of those assets.

"We think we have a cogent basis for increasing the value of the company and we want to get in there and make it happen."

Through Bigshop.com.au, Khan's stake in Biota is more that twice the size of the next largest shareholder, National Nominees Ltd with 3.62 per cent.

According to Grant, National Nominees does not have a representative on Biota's board.

Khan said he would be the only significant shareholder interest on the board if his request for two new seats was granted. "As the largest shareholder, we don't think it is unreasonable to have two out of seven seats on the board," he said.

Biota currently has five board positions, two of which are up for re-election at the upcoming AGM.

Khan is known to have approached other Biota shareholders but declined to talk about the number or size of alliances he may have formed.

Asked if he intended to increase his shareholding to the 19.9 per cent level at which ASX rules require a formal takeover offer, Khan said it would be "inappropriate to discuss that at this stage."

As of June 30, Biota's cash reserves totalled $20 million. In the past, Khan has used minority shareholding positions to push for a board level influence in companies with significant cash assets.