from yahoo chat
formerbig4partner
2 days ago
So I've obtained a transcript of the hearing on the motion to expedite. Some interesting observations.
1. The staff of the FTC was all set to recommend the deal for approval and a final consent order was expected by the end of May at the latest. Now that litigation has commenced, the staff is sitting tight and will not take any further action until the litigation concludes. I think the rationale here is that not when litigation will conclude, they simply don't want to sign off on concessions that may need to change with the passage of time.
2. VC Laster, Paul Weiss and Cravath all seem to be in agreement that outside dates are no longer relevant. Either FRE wins and the outside date has passed (4/24) or they lose and they breached which means that he can order specific performance for the merger to be completed on whatever date he deems appropriate. Paul Weiss agreed that if they lost, they would complete the merger and not even attempt to argue that the outside date had passed.
3. VC Laster was not swayed by Paul Weiss' argument that they needed the Akorn internal investigations to conclude to be ready to go to trial. Paul Weiss indicated that the investigations were not likely to conclude until August and that if VC Laster was not biting on a January trial date, a September trial date would be acceptable. Laster said he did not believe the investigations needed to be concluded by the trial for two reasons. The first is that he was not bound to rely on the factual findings of those investigations. That is, Fresenius would have to establish the existence of the facts underlying any conclusions. In addition, he noted that if, for example, the report was Akorn favorable, Paul Weiss was going to challenge the veracity of those conclusions. The gist of what he was saying is "listen, you guys need to do your own discovery and can't piggyback off of any reports that come out of an investigation."
4. I thought is was interesting that when VC Laster was talking to Cravath, he asked how about an August start date. The Cravath lawyer did not particularly object to it. After a short recess, however, VC Laster came back in, noted that it was in everyone's best interest to get this settled quickly and picked a 7/9 start date.
5. The trial will actually be 4 1/2 days long.
6. The Cravath lawyer had some good statements (as expected). He noted that just because you keep shouting the word fraud, it does not mean a fraud occurred and Akorn categorically denies that fraud (but for that one drug) has occurred. In addition, when the Paul Weiss lawyer accused him of not responding to the many allegations Paul Weiss made, he essentially said being page limited in his response, he chose to focus his response on the real issues. He noted that while he was born at night, he was not born last night.
All in all, this hearing had to be a complete victory for Akorn and Cravath. A trial start date that is extremely close to where they wanted to be, a statement by the judge that the investigations are irrelevant and an acknowledgement that if he rules this deal closes, this deal will close no matter what date they finish up.
One further note not particularly attributable to the hearing. There are those that have said that even in past cases where it was ruled there was no MAE, the transaction did not close. Those transactions involved facts not present in the instant case. In one case, the parties could not secure regulatory approval. In another case, there was a financing contingency and the banks refused to lend into the deal even though the court ruled no MAE. VC Laster actually touched on whether there were any of these side issues he needed to be aware of and Paul Weiss categorically said no. If the court rules the deal needs to be completed, it will be completed.
With this as a backdrop, I confess that I remain severely disappointed at the stock price. Even the most pessimistic of people would have to agree (after reading the complaint, the counterclaim and the transcript of the hearing on the motion to expedite) that there is at least a 50% chance this deal closes. If you assume a stand-alone value of 6 and that the outcome is now binary, as RBC suggests, that implies a current stock price of at least 20. Markets really do get disconnected from reality at times. In any event, I would agree with RBC that the outcome does appear to be binary (not seeing much chance of a recut the way this has played out) and I'm personally at 70% or better that Akorn has the winning argument based on what I've now been able to read.
Kingfrogcash
