Phil Frohlich‘s Prescott Group Capital Management, insists that shareholders of PharmAthene, Inc. (NYSEMKT:PIP) should vote against the merger with Thercalone Sciences. According to the press release, Prescott asks shareholders not to vote in favor of the issuance of additional shares of PharmAthene that are needed for the merger, and against board’s suspension of the special meeting of shareholders.
Under the terms of the merger agreement between the two companies, PharmAthene plans to issue additional shares for the current shareholders of Theraclone, such that the aggregate amount of shares held by them amounts to 50% of the new company.
Prescott currently holds 10% of PharmAthene, Inc. (NYSEMKT:PIP). The fund has been negotiating with the Board of the company regarding the merger with Theraclone, ever since they initiated the position in the company at the end of September. Prescott solicited the company two hold two special shareholders meetings to discuss the matter of the merger. However, the Board declined the requests stating that the fund needed to file a request with the SEC first. Also, the board mentioned that they do not plan to participate in discussions regarding the merger.
Phil Frohlich’s fund is justifying its position against the deal with Theraclone basing on several points such as:
We believe that PharmAthene’s SIGA litigation asset is hugely valuable and little credit for that value is given in the merger. How can the company’s own “fairness opinion” adviser value all of PharmAthene at only $1.72 a share?
Only after being pressed by Prescott did PharmAthene admit that its valuable $134 million NOL will be limited to a fraction of its stated value post-merger.
Prescott’s requested separate special meeting to receive additional information has effectively been rendered ineffective by the PharmAthene Board.
The full text of Prescott’s press release can be read via the link below: