DARA BioSciences, Inc, an oncology supportive care specialty pharmaceutical company, has signed a merger agreement with Midatech Pharma PLC, an international specialty pharmaceutical company located in Oxford, UK with a diversified portfolio of high-value products in development.
DARA has entered into a proposed acquisition agreement with Midatech whereby each share of DARA will be converted into the right to receive (i) 0.272 ordinary shares of Midatech, subject to certain adjustments, and (ii) one Contingent Value Right (CVR). All Midatech ordinary shares will be delivered to the holders of DARA common stock in the form of American Depositary Receipts (ADRs).
Based on the current price of Midatech, each DARA share will be converted into ADRs with a value equivalent to approximately $ 1.20 per DARA share. The ADRs will be listed on NASDAQ. Current DARA stockholders are expected to own approximately 16 per cent of Midatech after the closing of the transaction. Each CVR will represent the right to additional contingent cash payments in the event that certain sales milestones with respect to DARA's products Gelclair and Oravig are met.
A maximum aggregate value of $ 5.7 million in cash may become due and payable to the CVR holders in 2017 and 2018 upon attainment of the defined sales thresholds in 2016 and 2017, respectively.
"The opportunity for DARA to provide a commercial arm to Midatech in the United States is truly exciting for both companies. The agreement with Midatech provides DARA with the opportunity to maximise and expand DARA's commercial portfolio based on the depth of resources that are now available within the combined company", stated Christopher G. Clement, president and chief executive officer of DARA BioSciences.
"We are pleased to have a partner who understands the value of our strategy and positioning in oncology supportive care as well as the significance of our established commercial U.S. team. We are pleased to become part of Midatech and believe there is significant value in their portfolio of therapeutic products combined with our marketed products." Clement concluded.
Commenting on the announcement, Midatech's chief executive officer, Dr. Jim Phillips, said "The acquisition of DARA provides Midatech with access to an impressive portfolio of products and a fast-growth revenue stream in our target therapeutic area of oncology. The acquisition also provides us with a commercial footprint from which we can launch our own products and thus retain more value. I am pleased to be delivering such scale and growth catalysts to our stockholders as defined in the strategy at the time of our IPO in December. I look forward to working with our expanded team as we welcome DARA staff to Midatech."
Pursuant to the terms of an acquisition agreement and plan of merger subject to the laws of the State of Delaware (the Acquisition Agreement), unanimously approved by each party's Board of Directors, each share of DARA issued and held as at the date immediately prior to the acquisition becoming effective will be converted into the right to receive: (i) the equivalent of 0.272 new shares of Midatech (subject to certain adjustments); and (ii) one CVR.
Subject to potential adjustment as described below, it is expected that Midatech will issue approximately 5.4 million new ordinary shares of 0.005 pence each in the share capital of Midatech (Ordinary Shares) via ADRs and current DARA shareholders will own approximately 16 per cent of the enlarged group following completion of the acquisition. This represents approximately $ 1.20 per DARA share, a premium of 50.8 per cent over the DARA closing price of $ 0.796 per share on June 3, 2015 and a premium of 59.8 per cent over the last 15 day volume weighted average DARA closing price of $ 0.751 per share.
Each DARA shareholder will receive one CVR per share of DARA common stock held, representing a right to additional contingent cash payments in the event that certain sales milestones with respect to DARA products Gelclair and Oravig are met in 2016 and 2017. A maximum aggregate value of $ 5.7 million in cash will become due and payable to the CVR holders if such milestones are met, and which shall be financed from the profits of DARA in respect of such sales.
The share exchange ratio is subject to adjustment based on the volume-weighted average price of Midatech's common stock on the AIM Market of the London Stock Exchange (AIM) over the 15 trading day period ending on the business day immediately prior to the acquisition becoming effective. The exchange ratio is subject to an implied acquisition price range of $ 1.08 to $ 1.32 per DARA share and will be adjusted for movements outside this range, subject to a maximum exchange ratio of 0.306 and a minimum of 0.249.
Application is expected to be made in due course to the London Stock Exchange for new ordinary shares in respect of the acquisition to be admitted to trading on AIM and which are to be issued to DARA shareholders by means of the issue of a proportionate number of ADRs expected to be admitted to trading on the NASDAQ Stock Market LLC trading platform (NASDAQ). The new ordinary shares will rank pari passu with the existing ordinary shares. Existing DARA warrants will continue to be exercisable per their terms and will receive Midatech ADRs and a CVR, if and when exercised.
The acquisition is subject to customary closing conditions including, among other things, approval of the transaction by stockholders of DARA and the listing of Midatech's ADRs on NASDAQ. The acquisition is expected to close in the third or fourth quarter of 2015.
Aquilo Partners, L.P. served as financial advisor to DARA and K&L Gates LLP served as its legal advisor.