(CN) - Valeant Pharmaceuticals International's $2.6 billion bid for Medicis Pharmaceutical leaves public shareholders in the dust, a class claims in court.
Even though the company's flagship products are "cutting edge," shareholders say the firm's stock price has been hit hard after "unwarranted media attention" focused on the deaths of Medicis chairman and CEO Jonah Shacknai's girlfriend and son, which happened days apart last July.
"Although no charges were brought, investigation into these matters caused Medicis shares to plunge within hours of the report," according to the complaint in Delaware Chancery Court. "Valeant is seeking to acquire the company at the most opportune time, at a time when the company is still in the process of recovering from negative media attention and is positioned for tremendous growth."
Valeant's offer of $44 per share, meanwhile, falls short of other potential deals after other bidders indicated that Medicis is worth up to $50 per share, the complaint states. Valeant, according to the complaint, would gain a greater foothold in the dermatology field while benefitting from Medicis' sales force.
Despite the plunge in stock price Medicis experienced "resurgence" in 2012, according to the complaint, reporting $0.52 earnings per share in the second quarter on guidance of between $0.37 and $0.47 earnings per share.
But shareholders claim the fix is in since Shacknai is set to receive nearly $35 million from the sale, while other top brass at Abraxis are set to cash in as well. In addition, the deal includes no-shop, no solicitation and a matching rights provisions as well as an $85 million termination fee, according to the complaint.
Finally, shareholders claim that the proxy Medicis filed with the SEC is full of holes.
"The preliminary proxy omits material information with respect to the process and events leading up to the proposed transaction, as well as the opinion and analyses of Medicis's financial advisors," the complaint states. "This omitted information, if disclosed, would significantly alter the total mix of information available to the public holders of Medicis's shares."
Shareholders are represented by Seth Rigrodsky, Brian Long and Gina Serra of Rigrodsky & Long in Wilmington, Del.
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