It will be interesting to see where TLN goes tomorrow once the share volume and price increase of 110% hits the the mainstream news!! Plan to hold
The acquisition agreement
The acquisition agreement between Bellus Health and Thallion provides for a cash consideration of approximately $6,332,000 (17.65 cents per common share (on a fully diluted basis)), subject to adjustments, and (ii) the issuance of one CVR per common share, entitling the holder thereof to: (a) its pro rata share of 80 per cent of any additional purchase price consideration to be received from Premium Brands Holding Corp. in 2016 (expected to be up to approximately $1.45-million) (or 3.23 cents per CVR), and (b) its pro rata share of 5 per cent of the Shigamabs revenue generated or received by Bellus Health, capped at $6.5-million (or 18.12 cents per CVR), payable in instalments upon the achievement by Bellus Health of each whole $10-million tranche of revenue on Shigamabs.
The estimated cash portion of the consideration payable under the acquisition agreement and the combined cash and CVR consideration (assuming that the maximum amount payable under the CVRs is achieved) represent premiums of 35.8 per cent and 200.0 per cent, respectively, to Thallion's closing trading price of 13 cents on the TSX Venture Exchange on June 17, 2013, premiums of 39.4 per cent and 208.1 per cent, respectively, based on the volume weighted average trading price for the 20 prior trading days, and premiums of 52.4 per cent and 263.9 per cent, respectively, based on the volume weighted average trading price for the 90 prior trading days.
The amount to which the holders of CVRs may be entitled can be reduced for potential contingent liabilities owing by Thallion (including, but not limited to, in respect of the indemnity agreement with Premium Brands, accounts payable or litigation). The CVRs will not be assignable or transferable and will not be listed on an exchange. Under the terms of the CVRs, Bellus Health will covenant and agree to use commercially reasonable efforts within a reasonable time period from closing to continue the development of Shigamabs upon terms and conditions detailed in the definitive transaction documents.
The acquisition agreement also contains customary provisions prohibiting Thallion from soliciting any other acquisition proposal, but allows for termination under certain circumstances, including receipt of an unsolicited bona fide acquisition proposal from a third party that the Thallion board of directors, in the exercise of its fiduciary duties, and in accordance with the terms and conditions of the acquisition agreement, finds to be superior to the proposed transaction, subject to the reimbursement by Thallion of Bellus Health's transaction-related expenses, up to an amount of $150,000. Completion of the arrangement, which is expected to occur in August, 2013, is subject to receipt of court and regulatory approvals and other third party consents. The acquisition agreement also contains closing conditions, including that Thallion have net cash on hand, as determined pursuant to the terms of the acquisition agreement, of at least $7.5-million on the effective date, that no more than 5 per cent of Thallion shareholders dissent to the arrangement and other customary closing conditions. The acquisition agreement also provides that if the net cash condition is not met, Bellus Health will have the option of either terminating the acquisition agreement or reducing the cash portion of the consideration payable under the arrangement in proportion to any shortfall on a dollar-for-dollar basis, pro rata to each Thallion share, rounded to the nearest 100th of a cent. If Thallion's net cash at the effective date is estimated to be in excess of $7.5-million, the cash portion of the consideration payable under the arrangement will instead be increased in proportion to such excess amount on a dollar-for-dollar basis, pro rata to each Thallion share, rounded to the nearest 100th of a cent. The parties intend to issue a further press release on or about five business days before the annual and special meeting, announcing any adjustments to the purchase price relating to estimated net cash.