Replies to post #1966 on IDM Pharma, Inc. (IDMI)

[tzm]

It is a long read but pages 38 and 40 have some useful information regarding stockholder rights and the legal proceeding. Here are a couple of snippets:

"Appraisal Rights.


Holders of the Shares do not have appraisal rights in connection with the Offer. However, if the Merger is completed, stockholders who have neither voted in favor of the Merger nor consented thereto in writing, who timely submit a demand for appraisal in accordance with Section 262 of the DGCL and who otherwise comply with the applicable statutory procedures under the DGCL will be entitled to receive a judicial determination of the fair value of the Shares (exclusive of any element of value arising from the accomplishment or expectation of such merger) and to receive payment of such fair value in cash (all such Shares, the "Dissenting Shares" ). Any such judicial determination of the fair value of the Dissenting Shares could be based upon considerations other than or in addition to the price paid in the Offer and the market value of the Shares. The value so determined could be higher or lower than, or the same as, the Offer Price paid pursuant to the Offer or the Merger. Moreover, Takeda America could argue in an appraisal proceeding that, for purposes of such a proceeding, the fair value of the Dissenting Shares is less than the Offer Price paid pursuant to the Offer or the Merger. In the event that any holder of Shares who demands appraisal under Section 262 of the DGCL fails to perfect, or effectively withdraws or loses his, her or its rights to appraisal as provided in the DGCL, the Shares of such stockholder will be converted into the right to receive the Offer Price. Failure to follow the steps required by Section 262 of the DGCL for perfecting appraisal rights may result in the loss of such rights.


The foregoing summary of the rights of stockholders seeking appraisal rights under Delaware law does not purport to be a complete statement of the procedures to be followed by stockholders desiring to exercise any appraisal rights available thereunder and is qualified in its entirety by reference to Section 262 of the DGCL. The perfection of appraisal rights requires strict adherence to the applicable provisions of the DGCL. If a stockholder withdraws or loses his right to appraisal, such stockholder will only be entitled to receive the Offer Price paid in the Offer.


APPRAISAL RIGHTS CANNOT BE EXERCISED AT THIS TIME. THE INFORMATION SET FORTH ABOVE IS FOR INFORMATIONAL PURPOSES ONLY WITH RESPECT TO ALTERNATIVES AVAILABLE TO STOCKHOLDERS IF THE MERGER IS COMPLETED. STOCKHOLDERS WHO WILL BE ENTITLED TO APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER WILL RECEIVE ADDITIONAL INFORMATION CONCERNING APPRAISAL RIGHTS AND THE PROCEDURES TO BE FOLLOWED IN CONNECTION THEREWITH BEFORE SUCH STOCKHOLDERS HAVE TO TAKE ANY ACTION RELATING THERETO.


STOCKHOLDERS WHO TENDER SHARES IN THE OFFER WILL NOT BE ENTITLED TO EXERCISE APPRAISAL RIGHTS WITH RESPECT THERETO BUT, RATHER, WILL RECEIVE THE OFFER PRICE PAID IN THE OFFER."

"Legal Proceeding.


On May 22, 2009, a lawsuit was filed in the Superior Court of the State of California, Orange County, against the Company, each member of the Company's board of directors including its President and Chief Executive Officer, Takeda America and the Offeror. The complaint, captioned Hartman v. Walbert et al.

, is brought by Richard Hartman and Bryan Burnett, who claim to be stockholders of the Company, on their own behalf, and seeks certification as a class action on behalf of all Company stockholders, except the defendants and their affiliates. The complaint alleges that the defendants breached their fiduciary duties, and/or aided and abetted the breach of fiduciary duties, owed to Company stockholders in connection with the Offer and the Merger, including with respect to the Offer Price and other terms of the Merger Agreement and the process by which the Merger Agreement was approved by the Company's board of directors. The complaint seeks injunctive relief enjoining the Offer and the Merger, or, in the event the Offer or the Merger have been consummated prior to the court's entry of final judgment, rescinding the Offer and the Merger. The complaint also seeks an accounting for all damages and an award of costs, including a reasonable allowance for attorneys' and experts' fees and expenses. The Company believes the plaintiff's allegations lack merit and will contest them vigorously."

[tzm]

Page 39 is also important because it explains what Takeda will try to do to avoid delays in the merger completion. They will use the Top-Up Option in order to get the 90% necessary for a Short-Form Merger.

"Top-Up Option.


Subject to the terms of the Merger Agreement, the Company has granted Takeda America and Offeror an irrevocable option (the "Top-Up Option" ), exercisable only on the terms and conditions set forth in the Merger Agreement, to purchase from the Company an aggregate number of newly-issued Shares equal to the lesser of (i) the number of Shares that, when added to the number of Shares owned by Offeror as of immediately prior to the exercise of the Top-Up Option, constitutes one Share more than 90% of the number of Shares then outstanding on a fully diluted basis (assuming the issuance of the Top-Up Option Shares) or (ii) the aggregate of the number of Shares held as treasury shares by the Company and its subsidiaries and the number of Shares that the Company is authorized to issue under its Certificate of Incorporation, but that are not issued and outstanding (and are not reserved for issuance pursuant to the exercise of stock options or warrants) as of immediately prior to the exercise of the Top-Up Option. The obligation of the Company to issue such Shares is subject to compliance with all applicable regulatory and stock exchange requirements.


The Top-Up Option may be exercised by Offeror, in whole or in part, at any time at or after the Acceptance Time, and no exercise of the Top-Up Option shall be effective prior to the Acceptance Time. The aggregate purchase price payable for the Shares acquired upon exercise of the Top-Up Option shall be determined by multiplying the number of such Shares by the Offer Price. Such purchase price will be paid by Offeror, at its election, either entirely in cash or by executing and delivering to the Company a promissory note having a principal amount equal to such purchase price, or by any combination of the foregoing. Any such promissory note shall bear interest at the applicable federal rate determined under Section 1274(d) of the Code, shall mature on the first anniversary of the date of execution and delivery of such promissory note and may be prepaid without premium or penalty. The Top-Up Option is intended to expedite the timing of the completion of the Merger by permitting Offeror to effect a "short-form" merger pursuant to applicable Delaware law at a time when the approval of the Merger at a meeting of the Company's stockholders would be assured because their ownership would represent at least a majority of the voting power of all Shares entitled to vote at such a meeting and required to complete the Merger.


Short-Form Merger.


Section 253 of the DGCL provides that, if a parent corporation owns at least 90% of each class of the stock of a subsidiary, that corporation can effect a short-form merger with that subsidiary without the action of the other stockholders of the subsidiary. Accordingly, if Offeror or any other subsidiary of Takeda America shall own, by virtue of the Offer or otherwise, 90% of the outstanding Shares, Takeda America, Offeror and the Company shall take all actions necessary and appropriate to cause the Merger to become effective as soon as practicable following the expiration of the Offer, without a stockholders' meeting in accordance with Section 253 of the DGCL."

[tzm]

I know a lot of you guys are upset with the takeover price but my guess is that the Takeda offer was the best offer at the time and IDM decided to take it and leave themselves a 20 business day window for a better offer to come about. They can't solicit another offer but another company can approach IDM and submit an offer. The marketing of Mepact must move forward and since IDM didn't have the capabilities to market the drug, the Takeda offer was the best option.

It is my belief that the stock is trading a couple cents below the tender price because people are playing it as if it is a free call; If a better offer arrives, well then they make the upside and if nothing better comes, well then they tied up their money for a month and got paid a couple of cents.

The appraisal rights and the court action taken by shareholders are two other variables at work but it seems that the top-up option will negate the appraisal rights. The court action might force Takeda to sweeten the deal in order to proceed quickly but that seems like a long shot also. Good luck everyone.