Globe and Mail article
Future Shop founder to make Drug Royalty bid
Plans to top share exchange offer from British drug firm
By LEONARD ZEHR
BIOTECHNOLOGY REPORTER
Wednesday, March 6, 2002 – Print Edition, Page B5
The former controlling shareholder of Future Shop Ltd. plans to
make a $133-million cash bid to acquire Drug Royalty Corp. Inc.,
topping a competing share exchange offer from British drug developer Cambridge Antibody Technology Group
PLC.
The bid is being made by a subsidiary of Inwest Investments Inc., a private holding company controlled by
Hassan Khosrowshahi, the founder of Burnaby, B.C.-based Future Shop, which was acquired by Best Buy Co.
Inc. of Bloomington, Minn., last year.
Inwest received about $400-million in the Best Buy transaction. Inwest also has extensive real estate holdings that
include shopping centres, apartment blocks and golf courses, mostly in British Columbia.
"I am very interested in the pharmaceutical industry," Mr. Khosrowshahi said in a telephone interview yesterday.
"My family went into the pharmaceutical business in 1948 in Iran."
The Khosrowshahi family left Iran in 1979 and after settling in Canada, launched its first Future Shop outlet in
Vancouver in 1982.
He said he plans to continue Drug Royalty, which acquires royalty positions in drug companies and
pharmaceuticals, as a private company.
In a statement, Inwest said it would offer $3.05 a share cash for all of Drug Royalty's stock.
Drug Royalty shares closed at $2.72 on the Toronto Stock Exchange yesterday.
Cambridge Antibody's stock swap valued Drug Royalty at $3 a share or $126-million. However, Inwest
estimated that the Cambridge offer has a current value between $2.90 and $2.96 a share.
Drug Royalty said its board considers the Inwest offer to be superior to that of Cambridge, which has until Friday
to announce a final exchange ratio for Drug Royalty and match the Inwest offer.
Inwest said its offer is subject to approval of the Drug Royalty board by this Saturday.
Investment sources, however, doubt Cambridge will make a new offer.
There is no breakup fee in the original friendly Cambridge takeover bid.
However, if Drug Royalty is acquired by another company, Cambridge can repurchase Drug Royalty's interest in
Cambridge for $14-million cash.
"That's all Cambridge wanted from the beginning," one source said.
In 1994, Drug Royalty invested $3-million for a 3.5-per-cent interest in Cambridge's revenue until 2004 and 2.5
per cent of the revenue until 2009.
Cambridge has unsuccessfully tried on several occasions to repurchase the eight-year-old investment by Drug
Royalty before it launches a potential blockbuster drug to treat rheumatoid arthritis next year.
Cambridge had planned to end Drug Royalty's investment program and use its existing cash flow to finance its
drug development business. It also did not plan to retain Drug Royalty's management.
The Inwest offer is subject to signing lock-up agreements with MDS Capital Corp., Canadian Medical Discovery
Fund and the Healthcare and Biotechnology Venture Fund, which together own about 30 per cent of the fully
diluted shares of Drug Royalty.