Graeme McRae, founder, president and chief executive officer of the bio-pharmaceutical company, explained to The Intelligencer an August, 2012, attempt by two shareholders to “acquire a controlling interest” in the company's animal health business was nothing more than a “hostile takeover” attempt that failed but has, through acquisition of shares, led to an uncomfortable period for the Belleville-based company.
“Maybe we're naive, but we talked to these guys very openly and they said 'We'd like to look at expanding your animal health business and we have a lot of money behind us,' and we said, 'Great,' and then they came in and we gave them a huge amount of data on our plans,” said McRae. “I had a funny feeling, though, in one of the first meetings and said 'What are you guys really thinking here because you don't know anything about animal health?'”
It turns out McRae's gut feeling was accurate as the pair made a “pretty pathetic” offer to acquire the animal health aspect of Bioniche. The pair were told their offer was too low and they did not have a proper grasp of the business, said McRae.
The belief was that was the end of the matter until, months later, board chairman Jim Rae received a letter from the pair saying they were willing to invest a certain amount of money in to the company but, in exchange, they wanted control of the board of directors.
“Now, that's a hostile takeover because once you control the board you control everything and we're very democratic,” said McRae. “We know what they'd do. They'd take advantage of a low share-price, they'd put enough money in to own the company and then all our loyal and faithful shareholders would be left with a much smaller part and they'd get diluted down. It was such an obvious thing.”
The company dismissed the offer, but it didn't stop the pair from then tracking down a Quebec-based shareholder and obtained five per cent of the company. Holding that amount, McRae explained, enables the holder to call a special meeting of the company and propose a new board of directors at any time.
The application for that meeting was submitted, he explained, but it was not done properly, prompting Bioniche's lawyer to advise it has no legal leverage to force such a meeting.
In the legal dustup, Bioniche was taken to court by the pair who continue to push for a shareholder meeting.
In the interim, Bioniche had already called a shareholder meeting for November which is set to take place as scheduled.
McRae shrugged off the court matter.
“I think the judge must have got a sniff of what was going on because he said to come back in July and talk then. If they do win the court thing, the judge will say we do have to call the meeting which means it wouldn't happen until September or October and we've already called one for November,” he said.
McRae said the matter has, though, upset many shareholders who recognize Bioniche is building its value over time.
“We're getting a lot of calls from some pretty big shareholders who are saying they have more shares than these guys. We're telling them to not rock the boat and we'll discuss this in November,” he said.
McRae said in Bioniche's 34 years it has never faced a takeover such as this, though there have been “little groups” that admire the technology for the animal branch's E.coli vaccine for cattle and have offered to take it forward, but those offers have been genuine.
“I haven't seen anything as blatant as this,” he said. “We've got a group of shareholders who have called us and said not to worry, they're not going to vote on (the rogue shareholders') board of directors.”
brice.mcvicar@sunmedia.ca