A Bird in the Hand
Executive Summary
The bottom line on Chiron’s offer, said Viagene CEO Bob Abbott, was that, from a shareholder point of view, a bird in the hand was worth two in the bush.
The bottom line on Chiron’s offer, said Viagene CEO Bob Abbott, was that, from a shareholder point of view, a bird in the hand was worth two in the bush. The $9 per share 40/60 cash/stock offer came at a 67% premium to Viagene’s month-before price and a 260% premium to its trading low—even if it didn’t at all improve on the $9 price paid by the IPO investors.
“Acquirors’ offers don’t come along very often,” said Abbott, and while management and employees were willing to take the risk of independence and the company had at least two years of cash and four ongoing partnerships, Abbott didn’t feel the shareholders weren’t confident enough to let their money ride (as evidenced by Viagene’s post-IPO stock performance). Moreover, Viagene and Chiron won’t have to make the layoff decisions Chiron had to make with Cetus—a consideration for Abbott, though less of one, apparently, for other board members.
In fact the message of the Viagene-Chiron shouldn’t be lost on industry CEOs who have, for one reason or another, resisted mergers (See “Intrabiotech Mergers? Don’t Bet On It”IN VIVO, Nov. 1994). Most recent mergers have either been distress sales (e.g. Zynaxis-Secretech, Integra-Telios or Boston Life Sciences-Greenwich) or represent relatively unusual circumstances in marginally healthy companies (CEO willing to step down; no layoffs). But with Viagene-Chiron, we’ve seen a relatively successful and healthy company take the money when it’s offered.