Biota, Nabi amend merger terms to placate shareholder

Biota Holdings (ASX:BTA) and US-based Nabi Pharmaceuticals have amended the terms of their proposed merger, in a bid to placate Nabi shareholders seeking to block the deal.

Crucially, Nabi shareholder Mangrove Partners Fund, which had previously been opposed to the merger, has now agreed to support the revised terms.

The terms have been amended to allow Nabi to contribute a far lower cash pool to the venture, and return the excess funds back to investors.

Instead of the US$54 million ($51.5 million) Nabi would be contributing under the previous plan, it would now be providing just US$27 million.

But the revised terms would also see Biota take a larger stake of the JV – between 81.4% and 85.8% depending on Biota's share price in US dollars at the time of the merger. This compares to the roughly 74% previously stipulated.

Biota chairman Jim Fox said the changes have in part been motivated to address the decline in the company's share price since the deal was first proposed in April. The price was hovering around a dollar before the announcement, but had fallen back to 72c as of yesterday.

Fox said the new terms have been designed to make the merger a more enticing proposition for Nabi shareholders, while keeping the deal attractive for Biota investors.

“Biota shareholders...will now retain an even greater proportion of the company post-merger, and the reduced cash to be provided by Nabi will be at Biota's prevailing share price and not at any discount,” he said.

Fox added that 90% of Biota shareholders had already supported the tie-up. But Mangrove had opposed the merger and had been soliciting fellow Nabi shareholders to vote it down. Mangrove and its affiliates own around 4% of Nabi.

Biota Pharmaceuticals developed flu drug zanamivir – marketed by GlaxoSmithKline as Relenza – and is working with Japan's Daiichi Sankyo on second-generation antivirals including laninamivir. Nabi specialises in boosting the immune system to treat nicotine-addiction and bacterial infections.

If the merger goes through, Biota will uproot from Australia and set up shop in the US, delisting from the ASX in favour of a Nasdaq listing in the process.

In the wake of the announcement, Biota (ASX:BTA) shares fell back another 5.56% to reach 68c by around 3pm on Tuesday.