Cold-FX Heats Up

by Max Fawcett, Managing Editor

On August 10, the Montreal-based Paladin Labs announced a hostile takeover bid for Edmonton-based Afexa Life Sciences, the maker of Cold-FX, Canada’s most popular over-the-counter flu medicine. Paladin is offering 55 cents a share, or 0.013 of a Paladin share for each Afexa share it doesn’t already own, a bid that values the company at just over $56 million. The bid is the result of a breakdown in negotiations between the two companies, and after adopting a poison-pill defence Afexa is now on the lookout for a white knight.

Afexa chairman Bill White thinks the Paladin offer is far too low, given the value of the Cold-FX brand and the other products in the company’s pipeline. “We’re trying to identify the best candidates to work with,” he told the Globe and Mail’s Boyd Erman on Wednesday. “We think there could be an alternative transaction that comes to the fore that could be much better.”

Erman points out that Paladin’s bid may still carry the day, despite Afexa’s unwillingness to cooperate with it. Under Canadian corporate law, Afexa doesn’t have much time to find a new suitor now that it has invoked a shareholder’s rights plan. And because it already controls 15 per cent of the company through open-market acquisitions, it has an automatic advantage over other potential bidders.

However things turn out, one thing seems clear: Afexa’s days as an independently owned and operated company appear to be numbered. Depending on who acquires Afexa and what it decides to do with its assets, Alberta’s biotech sector may soon find itself without one of its leading companies.

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