Investors Fight Complete Genomics Merger

Investors Fight Complete Genomics Merger

By DEE MOORE 

     (CN) - Shareholders claim in a class action that a merger between Complete Genomics and BGI-Shenzhen resulted from an "unfair and uninformed process."
     Investors claims the $3.15 per share is inadequate despite the offer representing a "54 percent premium to the $2.04 closing price on June 4, the last trading day prior" to Complete Genomics announcement that it was going to 'undertake an evaluation of strategic alternatives" to acquire the funds needed to' commercialize its technology," the complaint states.
     The transaction is valued at $117.6 million. At the same time Complete Genomics took out a $30 million loan with BGI for bridge financing until the merger is complete.
     Complete Genomics provides whole human genome sequencing which, according to the complaint, is used by medical researchers. The company is located in Mountain View, Calif. BGI also operates genome sequencing centers that support scientific research in agriculture, animal husbandry and human genetics.
     Investors claim that they are being denied the right to a "fair process" and that the price offered for their shares does not "reflect the true inherent value of the company." The complaint quotes a Bloomberg news interview with genetics "industry leader Jay Flatley" in which he states that genome sequencing is a highly lucrative venture.
     "It's a very attractive industry, it's growing fast, there's huge potential in so many areas of sequencing that I think it's drawn a lot of attention," Flatley told the news service.
     "While Complete Genomics did have a temporary run of weaker results that depressed its stock price," the complaint states, "the company's recent contract wins and positive publicity, forthcoming CLIA (Clinical Laboratory Improvement Amendments) license and most importantly its industry leading Long Fragment Read technology have created substantial future value prospects for Complete Genomics for which its shareholders will be grossly undercompensated in the proposed acquisition."
     Investors say "draconian" deal protection devices include a "top-up option" which requires the company to issue additional stock after the offer expires which will allow BGI to acquire the 90 percent threshold required to give them control of Complete Genomics. In addition, the merger deal includes a "no solicitation" clause giving a five day window to match any non-solicited offers as well as a termination fee of $4 million.
     Meanwhile, board members entered into a "tender and support agreement with BGI" which guarantees that "17.5 percent of the company's outstanding shares are committed to be tendered in the offer," the complaint states.
     To make sure that there is no opportunity for other potential buyers to step in Complete Genomics has "entered into an agreement with a subsidiary of BGI for a $30 million convertible note (loan agreement) for the company's use," according to the complaint.
     President, chairman and CEO Clifford Reid is named as defendant as is the rest of Complete Genomics board.
     Investors are represented by Brian Robbins, Stephen Oddo, Arshan Amiri, Edward Gerard and Justin Rieger of Robbins Umeda in San Diego.

Copyright by Courthouse News Service 2012

http://www.cnssecuritieslaw.com/2012/09/26/579.htm