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Shares in Mayne Pharma (ASX: MYX) have held steady this morning after the Adelaide-based company asserted its plans to terminate a $672 million acquisition deal with US giant Cosette Pharmaceuticals, alleging its erstwhile suitor committed material breaches of their takeover agreement.
Mayne Pharma shareholders have gone through a rollercoaster ride since the two parties entered a scheme implementation deed (SID) in February at $7.40 per share, starting with Cosette claiming material adverse changes (MAC) at Mayne just a few months in, which if proven would invoke a $6.7 million break fee from the target.
The suitor alleged this was grounds to terminate the deed, but in mid-October the Supreme Court of NSW dismissed Cosette's claims as invalid with the SID therefore on foot - a decision that is currently under appeal.
The Takeovers Panel also concluded maters contained in Cosette's termination notices were known before orders were made to approve a scheme meeting. Even as Cosette was making its newfound disinterest in the deal known, Mayne Pharma shareholders voted in favour of the scheme anyway in June.
Soon after that meeting, Cosette then revealed to the Foreign Investment Review Board (FIRB) that it had re-evaluated the Mayne business - which mostly operates in the US - and planned to dispose of its main operation on Australian soil, a manufacturing site in Salisbury that employs more than 200 people.
In late October the US group then received a letter from Federal Treasurer Jim Chalmers with a "preliminary view is that the Proposed Acquisition would be contrary to the national interest, on the grounds that it would negatively impact the Australian economy and community".
The Treasurer was considering whether he should make orders prohibiting the acquisition contemplated by the scheme, emphasising the importance of the site to Australia’s pharmaceutical manufacturing and research and development capabilities.
Within a month on 21 November, Mayne Pharma received a formal notice from the Treasurer that he objected to the proposed scheme, making it therefore unlikely to proceed.
Mayne then received a letter from Cosette asking the parties to consult in good faith in relation to available alternatives, but after the market closed yesterday the Australian company revealed that conversations had gone nowhere.
"Mayne Pharma has attempted to engage in that consultation, but has not been able to reach any position with Cosette that might allow the scheme to proceed," the company wrote in a statement to the ASX.
"Today, Mayne Pharma issued a notice to Cosette pursuant to clause 15.1 of the SID in relation to Cosette’s material breaches of the SID which Mayne Pharma considers were wilful and intentional.
"Mayne Pharma’s notice has been issued on the basis that Cosette is in material breach of the SID as a result of Cosette’s conduct and engagement with FIRB which had the effect of defeating the FIRB condition."
Mayne also alleges that Cosette is in material breach of a number of other provisions of the SID including in relation to Cosette’s obligations to ensure it had sufficient funds to meet its obligations under the SID to fund the proposed scheme, as well as its "failure to comply with certain representations and warranties given in the SID regarding its debt financing obligations".
"Mayne Pharma may terminate the SID if the relevant circumstances set out in the notice of intention to terminate continue to exist for five business days, being to 10 December 2025," the company states.
"Mayne Pharma has reserved all of its rights in connection with Cosette’s material breaches of the SID and Cosette’s failure to perform its obligations under the SID."
Under the SID both parties were up for break fees under certain circumstances, but the latest announcement has not provided guidance on this matter.
MYX shares are currently trading at $3.39.
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