Peptech, Agenix to merge

Sydney-based biotech Peptech (ASX:PTD) and Brisbane-based Agenix (ASX:AGX) have revealed plans to merge, creating one of Australia's largest biotechnology companies with a market capitalisation of AUD$400 million.

The two companies believe that the merger will deliver a top five ASX listed biotechnology/healthcare company with a market capitalisation of more than $1 billion within five years.

The merger, which is subject to court approval through a scheme of arrangement, will see Agenix shareholders get seven Peptech shares for every 10 Agenix shares, based on a one-month weighted volume average share price of $1.61 and $0.90 respectively. Agenix option holders will also be offered Peptech shares in consideration of cancellation of their options. There is no cash component to the merger.

Agenix chairman Ravindran Govindran has pledged his 3,950,000 shares to the merger, and the company is confident that shareholders will support the merger. If the deal doesn't go ahead, Agenix will pay Peptech $1.5 million.

The merger is expected to deliver significant benefits to shareholders and stakeholders, according to Govindran and Peptech chairman Mel Bridges.

"Agenix has the management, scientific and product development expertise, infrastructure and capabilities to capitalise on the intellectual property portfolio of both companies. Peptech will bring its financial strength, intellectual property and access to domain antibody technology to the merged entity," Bridges said. "Together we will make a formidable force in Australia's biotechnology and healthcare sector."

Bridges said the merger of the two companies would create new synergies and strengths, including manufacturing capabilities, global and domestic marketing and distribution channels, a solid financial base with access to $40 million cash plus a further $20 million through credit arrangements, and a strong portfolio of products encompassing animal health, imaging, therapeutics and diagnostics.

"The intention is to add more to the portfolio -- we're still on the acquisition trail," he said.

The new entity will retain the name Peptech, although Bridges said the Agenix brand names would be kept. The company also expects to keep its operations in both Brisbane, where Agenix has a fully compliant and registered manufacturing facility, and Sydney. Bridges will take on the role of non-executive chairman, and Govindran non-executive director, while Agenix managing director Don Home will become managing director of the merged company.

Bridges said the two companies had been in discussions on and off for the last six months, and noted they knew each other well.

Dividend mooted

Peptech also announced plans to pay a dividend to shareholders on the resolution of its intellectual property dispute with Johnson & Johnson subsidiary Centocor, depending on the payment received as a result of the resolution. The matter is currently in arbitration, with a decision expected to be handed down toward the end of this year.

Bridges said the decision to pay a dividend to shareholders reflected the view of the strengths of its prospects in succeeding in the arbitration. Since a dispute with Abbott was satisfactorily resolved in late December 2003, the company has forecast revenues of $25-28 million for the 2002-03 financial year.

But Peptech directors believe the current share price does not reflect the value of resolution in the Centocor dispute.

After opening at $1.01, Agenix shares were trading at $0.93 at the time of writing -- the same price they closed at on Tuesday prior to a trading halt. Peptech shares were trading at $1.44, nine per cent lower than Tuesday's closing price of $1.58.

If it proceeds smoothly, the Peptech-Agenix merger is expected to be completed by September.