From The "NOT Likely To Prevail" Dept.: Any Claim That Merck Has "Undervalued" Idenix Shares -- At ~320 Per Cent Premiums

Okay -- this suit is just. . . silly. Let us start with the adage that such suits rarely succeed. Any time a target is bought for more than say 30 per cent over its pre-tender trading price, a suit alleging a "too-cheap" buyout/tender offer, almost never meets with success, in Delaware Chancery Court.

You see, Merck is paying well north of triple Idenix's prior trading range. This suit is D.O.A. Truly. Most of the Idenix candidates are Phase I/II. This means there is much uncertainty over whether any actual, FDA-approved drug will ever reach the US market (i.e., any significant rise in annual revenue will appear). An offer that prices Idenix at over three-times what it was worth, according to independent buyers and sellers, the morning before Merck's designs on it became known. . . sure is likely to be deemed very "fair". Now, add to this that the Idenix directors are entitled to the great deference of the "business judgment" rule in Delaware. . . and the case has no legs. Absent a showing that there was some form of collusion in setting the price -- by Idenix directors secretly working for Merck, this will go nowhere. And there will never be such a showing.

In addition, lockups, matching offers and no shop clauses are each common tools -- in public M&A land -- to protect integrity of the negotiations. You can bet the ranch on it. [In fact, Merck has.] Let's listen to a little Bloomberg reporting, here:

. . . .Merck, based in Whitehouse Station, New Jersey, said June 9 that it would acquire Idenix to expand its experimental pipeline for hepatitis C treatments. The proposed purchase price of $24.50 a share is more than triple Cambridge, Massachusetts-based Idenix’s closing level on June 6 of $7.23.

Merck is paying the highest premium on record for any health-care deal of at least $100 million, according to data compiled by Bloomberg. The price still fails to account for Idenix’s “intrinsic value” and resulted from a flawed process that prevents competing bids, investor Ronald Burns claimed in a complaint filed today in Delaware Chancery Court.

The deal includes a no-solicitation clause, grants Merck the right to match any superior offer and provides for a $115.6 million termination fee, according to the complaint. By accepting those terms, Idenix directors have “locked up” a sale to Merck, Burns said. . . .

Were I running external legal matters at Idenix, I'd seek to recover my own attorneys' fees from the plaintiff Burns here (those incurred in defending against such a likely nonsense claim), along with my motion to dismiss. I think a sober judge might likely grant the fee petition. The highest premium in any health care deal over $100 million. This suit has exactly zero -- to negative -- settlement value. It won't even delay the tender offer. Word.