Friday, March 13, 2009

Merck/Schering-Plough Deal to be Enjoined? First Shareholders' Putative Class Action Filed Against Board; Schering-Plough


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Last night, Landesbank Berlin Investment GMBH filed a shareholders' putative class action complaint, seeking (among other things) equitable relief -- from Judge Cavanaugh's federal District courtroom-bench, in Newark, New Jersey. [He is the same very able jurist handling all the other Schering-Plough/Vytorin-related litigation.]

This wholly-new suit alleges that the Schering-Plough board, and CEO Hassan, each personally breached (or, as below, SCH-IRCK'ed!) their fiduciary duties of loyalty, good faith and due care -- by endorsing such a low offer for Schering-Plough, and then, so-tightly limiting the ability of Schering-Plough to even entertain, let alone accept, a superior proposal. The suit also alleges that certain structural aspects of the reverse merger are intended primarily to benefit Schering-Plough senior executives, at the expense of a potentially superior structure, for the benefit of Schering-Plough's common shareholders.

Finally, Landesbank seeks to enjoin -- or halt -- the transaction altogether, so that a more transparent, open, and orderly auction process may ensue. Fascinating. Doubly so, that it was apparently brought by an institutional investor, not an individual. Buckle-up, here's the new logo [click to enlarge]!



Breaking with my usual prior practice -- I'll not quote any snippet, here -- I'll simply let you digest the 16 page-complaint (a PDF file), at your leisure. It is a very-worthy read.

In any event, Monday's NYSE open ought to be rather interesting, after the Merck-related run-up in today's NYSE session. The suit is captioned Landesbank v. Schering-Plough, et al. (Case No. 09-1099, US Dist. Ct., N.J., Complaint filed March 12, 2009).

UPDATED @ 3.15.09 PM -- Now, New and Improved! -- With "Whistle While You Schmerck" Action!:



Namaste

10 comments:

Anonymous said...

With all due respect to great creativity,colors and double entendre, those of us to whom this company and fine management is near and dear are calling it, SchMirck! (Same meaning intended.)

Anonymous said...

Excellent -- I'll mock one up,
and you may download it -- to use anyway you'd like.

One Sch-Mirck, comin' up.

See above -- in about 15 minutes!

Anonymous said...

I wonder if the new management will:

a) keep Veltri

b) replace Koestler with Strader (remember, she was displaced by Tom)

c) still sell that French sea-water

Anonymous said...

Here you go, Oh, Denizens of Kenilworth!

Cheers!

condor said...

My bets? (a) is toast (moved out of his current position) -- but not let go entirely, because he clearly must know "where the bodies are buried" on ENHANCE, so he'll be given another role at the new Schmerck;

(b) Yes. And, Dr. K will walk away with his 250,000 (October 2008 grant) of shares vested, due to change of control. Interesting problem with JNJ's reversion, that.

(c) Absolutely! C'est parfait!

Thanks, Anon.!

Do stop back!

Anonymous said...

I usually hate class action suits, but this one spells out the issues perfectly. The board sold the stockholders down the river.

Anonymous said...

It does look a fair bit like the Lear case (Carl Icahn was the suitor; court applied Delaware law):

". . . .In early 2007, Carl Icahn suggested to Lear's CEO that a going private transaction might be in Lear's best interest. After a week of discussions, Lear's CEO told the rest of the board. The board formed a Special Committee, which authorized the CEO to negotiate merger terms with Icahn.

During those negotiations, Icahn only moved modestly from his initial offering price of $35 per share, going to $36 per share. [Ed. Note: Will the Merck offer look the same, when the facts are revealed?] He indicated that if the board desired to conduct a pre-signing auction, it was free to do that, but he would pull his offer. But Icahn made it clear that he would allow the company to freely shop his bid after signing, during a so-called go-shop period, but only so long as he received a termination fee of approximately 3%.

The board did the deal on those terms. . . .

But the proxy statement does not disclose that shortly before Icahn expressed an interest in making a going private offer, the CEO had asked the Lear board to change his employment arrangements to allow him to cash in his retirement benefits while continuing to run the company. The board was willing to do that, and even engaged a compensation consultant to generate potential options, but the consultant advised that accommodations of the type the CEO desired might draw fire from institutional investors, a factor that deterred the CEO from immediately accepting any renegotiation of his retirement benefits.

Because the CEO might rationally have expected a going private transaction to provide him with a unique means to achieve his personal objectives [Ed Note: Sound like Fred?], and because the merger with Icahn in fact secured for the CEO the joint benefits of immediate liquidity and continued employment that he sought just before negotiating that merger, the Lear stockholders are entitled to know that the CEO harbored material economic motivations that differed from their own [Ed. Note: Like Fred?] that could have influenced his negotiating posture with Icahn. Given that the Special Committee delegated to the CEO the sole authority to conduct the merger negotiations, this concern is magnified. [Ed. Note: Will this turn out to be the case, in the Merck deal -- was CEO Hassan the deal's LEAD negotiator?] As such, an injunction will issue preventing the vote on the merger vote until such time as the Lear shareholders are apprised of the CEO's overtures to the board concerning his retirement benefits
. . . ."

In re Lear Corporation Shareholder Litigation,926 A.2d 94 (Del. Ch. Ct. 2007)

Anonymous said...

Makes me wonder if the entire asenapine review delay and complete response filing was simply a means to forestall a nonapproval letter and bump up the perceived value of SP prior to a sell out.

Salmon

Anonymous said...

Koestler replaced Cecil Pickett.

Koestler then replaced Strader (now with Merck) with Kola (ex Pharmacia - Hassan - then Merck Rahway).

Strader knows Kenilworth inside and out.

Interesting that Cecil Pickett resigned from Biogen-Idec last week. Is Pickett coming back to Kenilworth with Strader at his side? Who knows.

Anonymous said...

Hey Anon -- Regarding Cecil Pickett:

Certainly, stranger things have happened, but it seems unlikely that he'd return to Sch-Merck.

Why? Well, this -- from the Biogen Idec press release:

". . . .Dr. Pickett will continue to head Research and Development until his successor is appointed. He will remain on the Company’s Board of Directors after he steps down from his executive position. . . ."

Now, true enough, he could also simply resign from the Biogen Idec board of directors, upon returning to Sch-Merck -- but why wouldn't he do both NOW, if that was where he was headed anyway?

To my eye -- the flavor of the press release sounds like he may have beeen pushed -- not that he jumped.

But as I say -- stranger things happen everyday in the halls of Kenilworth [and now, Whitehouse Station].

Thanks -- great gossip fodder!