CVRs worth up to $195 million? Maybe not:
The CVRs could be worth up to $195 million, which, even with 201.8 million shares outstanding equals $0.97 per share.
But take a look at the notes to the TLON financial statements:
In the event of a liquidation, change of control, or sale of substantially all of the Company's assets, that occurs prior to the issuance of the maximum number of shares of Series A-3 Preferred that are issuable under the agreement, the 2012 Investment Agreement provides that the Purchasers may elect to receive an amount equal to the excess of the fair market value of the unissued shares of Series A-3 Preferred over the aggregate purchase price of such shares, as if the Purchasers had purchased such shares of Series A-3 Preferred immediately prior to such liquidation, change of control, or sale of substantially all of the Company's assets. As of March 29, 2012, the total amount payable to the Purchasers upon liquidation of the company was approximately $86 million, and the total amount payable upon a change of control or sale of substantially all of the Company's assets was approximately $136 million.
In other words, the liquidation preference of the convertible preferred shares that Warburg Pincus (WWP) and Deerfield (DF) own amount to $136 million. Should the private equity firms decide to exercise their liquidation preference, the net cash available to the common due to the CVR amounts to 59 million, which, when divided by the 201.8 million shares equates to 29.2 cents per share.
Thus the total deal price is potentially 34.8 cents per share if WP and DF exercise their liquidation preference. TLON closed trading on Tuesday at $0.37. Even counting the CVRs, the current deal is priced below yesterday's closing price, thus this deal is a true takeunder if WP and DF exercise their liquidation preference rights.
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