AKRX/FRE GR – OG Risk Arb spoke with AKRX IR.
AKRX/FRE GR – OG Risk Arb spoke with AKRX IR. Among other things, AKRX IR conveyed the following:
(1) the FDA has been involved for a while at AKRX’s request; AKRX will not say exactly when their involvement started but it sounds like it started more than a week or two ago; the FDA has not done any inspections of its own; the FDA is getting regular updates from the well regarded independent expert consultants AKRX has doing the review; AKRX has submitted an expected timeline for the completion of its investigation to the FDA but cannot share with us what the timeline is; the FDA has agreed to get regular updates about AKRX’s independent investigation rather than conducting its own investigation or inspections because AKRX’s investigation is far more extensive than what the FDA itself would do;
(2) the complaint which will be unsealed on Thursday will have a lot more details about AKRX’s investigation; FRE GR has communicated its concerns to AKRX generally but AKRX will have to wait to see FRE GR answer to the Complaint to see everything FRE GR is arguing; FRE GR has not provided AKRX a memorandum or report with the findings of FRE GR’s investigation; the parties shared information as they conducted their own investigations and all the underlying information regarding AKRX’s data integrity that FR GRE has was provided to FRE GR by AKRX; thus, AKRX knows everything FRE GR knows about the underlying facts; AKRX just does not know exactly what arguments FRE GR will make based on those facts;
(3) Paul Weiss is representing FRE GR in the litigation; we note that Paul Weiss represented ALR in the ALR/ABT litigation and Cravath – AKRX ‘s counsel—also represented ALR;
(4) AKRX refused FRE GR’s offer to delay until after AKRX’s investigation is complete because the deal is not conditioned on the completion of any investigation and AKRX believes FRE GR offer was just an
attempt to delay close; AKRX does not understand FRE GR’s decision to preemptively declare a termination because it allowed AKRX to go to court more quickly resulting in less delay; also suing now allows AKRX to get the judge to force FRE GR to continue to work on obtaining a consent decree from the FTC; AKRX noted that if FRE GR had not preemptively terminated the merger contract, the merger agreement’s termination date would have extended automatically to July 24, 2018 and any litigation likely would have started later;
(5) AKRX will not comment on whether the parties have discussed a price cut or whether FRE GR’s behavior behind closed doors recently implies they want out of the deal at any cost or whether FRE GR seems to be just angling for a price cut;
(6) AKRX sees this case as about whether a MAC has occurred because all the relevant representations are MAC qualified; AKRX feels very strongly that no MAC has occurred and remains confused as to why FRE GR would pursue its position; and
(7) when we suggested that AKRX should agree to a small price cut (less than 10%) to settle the matter because, for instance, FRE GR could hide behind the banks (who they might be able get to refuse to fund) even if ordered by the Court to close, IR pushed back and said AKRX thinks FRE GR has the money to close; this suggest to us that AKRX currently plans to seek to close on terms and is not currently considering accepting a price cut.
OG Risk Arb continues to use an 80% probability of close on either full terms or with a price cut.