Triton’s Clinigen Bid Wins Support From Proxy Advisory Firms

(Bloomberg) -- Clinigen Group Plc’s plan to sell itself to Triton Investment Management has won support from two prominent shareholder advisory firms, despite concerns among large holders including activist Elliott Investment Management that the terms undervalue the pharmaceutical company.

Institutional Shareholder Services Inc. said the transaction warranted its “qualified support” because of its substantial premium with the certainty of cash considerations. Glass Lewis & Co. called the deal an “attractive opportunity” for shareholders to exit in light of the company’s historical underperformance and the risks it’s facing.

Clinigen might have received a higher offer if it had run a more fulsome sale process, ISS said. The lack of a breakup fee or restrictions on Clinigen negotiating with other parties, though, should alleviate some investor concerns, according to the advisory firm.

“There is no apparent and sufficient reason to oppose the transaction at this time,” ISS said in its report. “If a competing bid emerges, this will be re-evaluated and the vote recommendation may be reconsidered.”

Activist Investor

Triton agreed to acquire U.K.-based Clinigen in December in a deal valued at roughly 1.5 billion pounds ($2 billion). 

Some investors including Elliott, which is Clinigen’s largest shareholder, consider the offer to undervalue Clinigen, according to people familiar with the matter, who asked not to be identified because it was private. None of Clinigen’s investors so far have gone public with their concerns. 

Clinigen’s second-largest holder, Slater Investments Ltd., also opposes the deal under the current terms.

“We will not be voting in favor of this deal as currently configured,” Mark Slater, the investment firm’s chairman, wrote in an email. 

Elliott said Tuesday in a regulatory filing that had increased its stake in Clinigen to 11.4%. Representatives for Clinigen and Elliott declined to comment.

Deal Vote

Glass Lewis said in a report that Triton’s proposal offers a significant premium to Clinigen’s fair value and its market price. The advisory firm noted it’s possible Triton could still increase its offer to placate certain investors and said it doesn’t discount the possibility that another bidder emerges. 

“Still, we believe that shareholders can support the scheme, being the only actionable offer currently on the table, while maintaining the flexibility to change their vote or allowing for the board to delay the shareholder vote should a superior proposal emerge,” Glass Lewis wrote in its report. 

While Clinigen investors would benefit from “considerably greater disclosure” on the depth of the board’s review process, the absence of such information is “unfortunately par for the course in this market,” according to Glass Lewis. 

Clinigen shareholders are scheduled to vote Jan. 18 on whether to approve the Triton deal. Despite the presence of well-known activists with large positions, there has been no public opposition to the deal, ISS said.

“While Clinigen’s assets may well be attractive to other PE firms or larger competitors, none appear to have demonstrated any public interest in acquiring the company,” it said. “In the absence of a higher offer, a vote for the proposed transaction is warranted at this time.”

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