Biotech Values

[DewDiligence]

FOMX acquires MNLO in all-stock deal:

https://finance.yahoo.com/news/foamix-menlo-therapeutics-merge-creating-110000833.html

Under the terms of the merger agreement, each share of Foamix stock will be exchanged for 0.5924 of a share of Menlo common stock and a contingent stock right (“CSR”)… Foamix shareholders will own approximately 59% of the combined company and Menlo shareholders will own approximately 41% on a pro forma, fully diluted basis…

This deal is being structured as a reverse merger, although it’s a regular-way deal from a business standpoint. I.e., although MNLO will be the surviving legal entity, the merged company will be run by FOMX’s management, its BoD will be controlled by FOMX’s directors, and existing FOMX shareholders will own a majority of the equity.

Based on Friday’s closing prices, MNLO shareholders are getting $7.33 ($4.34/0.5924) of stock—a 40% premium to MNLO’s close on Friday. However, this calculation is out the window insofar as FOMX is down 20% today. Moreover, the CVR applies to existing FOMX shareholders rather than to existing MNLO shareholders, potentially reducing the equity stake of existing MNLO shareholders below the 41% figure mentioned above.