Private placement volume stalls despite higher stocks; Vion raises $32.5 million in direct placement

By Sheri Kasprzak

Atlanta, Jan. 26 - Even though stock prices made gains for the second day in a row, private placement volume in the United States slipped.

"There's really nothing that I can point to and blame for the drop," joked one market source. "The only thing I can really say is that it's early in the year still and that once mergers and acquisitions get under way, we should see more issuance."

The Dow Jones Industrial Average gained 37.03 Wednesday to close at 10,498.59; the Nasdaq composite index closed up 26.14 to end at 2,046.09 and the S&P 500 closed up 5.66 at 1,174.07.

"There's not much to report today," said one sell-side source. "I think, in the very near future, we can expect to see more deals from resources companies and biopharmaceutical companies. Those seem to be the two key sectors right now."

Heading up action in the United States was a $32.5 million direct placement from Vion Pharmaceuticals Inc.

The company has received agreements for 10 million shares at $3.25 each from institutional investors, sold through the company's shelf registration.

According to a few market sources, direct placements are gaining popularity because of the lack of the regulatory issues most PIPEs entail and because issuers can often get better pricing for their offerings.

"As for direct placements, sure, I think some companies find it easier than doing private deals because of the regulatory issues," said one market source who said direct placements are becoming popular.

"I don't think many issuers would admit that necessarily.

"But there are a few reasons why direct placements are more appealing. There's the speed of a PIPE without the regulation and the ease of negotiation. The Vion deal is a good example of good pricing through a direct placement."

Over the past several months, PIPEs have been under scrutiny by regulators concerned about the short selling of stocks. And this week, Omni Energy Services Corp. filed a lawsuit against the investors of its 6.5% subordinated convertible debentures, claiming the note holders engaged in short-swing trading. Last year, Guillaume Pollet, a former managing director at SG Cowen & Co. LLC, was charged with insider trading after allegedly short selling stocks from a private placement.

In addition, sector-specific factors are at work.

The market source said that biopharmaceutical stocks in general have performed well and that may also contribute to the solid pricing of Vion's offering.

The Vion deal is the third direct placement announced this week.

On Tuesday, ArQule Inc. announced a $31 million direct placement of 5,904,762 shares at $5.25 each and GTC Biotherapeutics Inc. wrapped a $10,395,000 direct placement of 7.7 million shares at $1.35 each.

CIBC World Markets Corp. and Leerink Swann & Co. are the placement agents on Vion's deal.

Based in New Haven, Conn., Vion is a pharmaceutical company focused on developing treatments for cancer.

Vion's stock closed down $0.189 at $3.501 on Wednesday.

Maverick Oil closes deal

Maverick Oil & Gas Inc. raised $30 million in a private placement of units, the company said.

The company sold 15 million units at $2 each. The units are comprised of two shares and one warrant.

The warrants allow for an additional share at $2 each for three years.

Part of the U.S. tranche was managed by Legend Merchant Group Inc.

"We are very pleased to have completed this financing and to have received such a positive response both from U.S. investors and from international investors," said the company's chief executive officer Mike Garland, in a statement.

"This financing will allow us to aggressively proceed with our business plan, not only enabling us to continue developing our existing portfolio of Barnett Shale and Maverick Basin properties but also to expand our domestic and international exploration and development portfolio."

London-based Maverick is an oil and gas exploration, development and production company. It plans to use the proceeds from the private placement for the development of its two Texas projects in the Maverick Basin and Barnett Shale regions. Part of the proceeds will be used for the development of opportunities in the United States and part will be used for international developments.

Maverick's stock closed up $0.05 at $1.82 on Wednesday.

Advance Nanotech raises $9.4 million

Advance Nanotech Inc. has raised $9,397,500 in a private placement of stock.

The company sold 4,698,750 shares at $2 each.

One warrant for every two shares of stock purchased in the deal was also issued to the investors, representing a total of 2,349,375 warrants. The warrants allow for an additional share at $3 each for three years.

Advance Nanotech, based in New York, acquires and commercializes nanotechnology for the electronics, biopharmaceuticals and materials markets.

On Wednesday, the company's stock closed unchanged at $13.50.

CalciTech deal oversubscribed

CalciTech Ltd. said Wednesday its previously announced $1.5 million private placement has been oversubscribed for total proceeds of $2.25 million.

The company sold 9 million shares at $0.25 each.

For each share purchased in the offering, the investors received one warrant good for an additional share at $0.35 each for a year and one half-share warrant, the whole of which allow for an additional share at $0.50 for two years.

"We are delighted with the take down of the placement," said the company's chief executive officer Roger Leopard in a statement. "We have decided to honor our subscriptions in excess of the initially planned $1.5 million up to $2.25 million in order to strengthen our balance sheet and to concurrently set the development of new projects in motions."

Based in Hamilton, Bermuda, CalciTech is a mineral technology company focused on technology that converts industrial lime waste with carbon dioxide into a specialty mineral. The company plans to use the proceeds from the deal to upgrade its small-scale production plant in Germany from a batch process to a fully integrated operation. The proceeds will also be used to complete patent applications and to finalize the production of its additive product. The remainder will be used for working capital.

The company's stock closed unchanged at $0.30 on Wednesday.

AFM plans private placement

At some point this year, AFM Hospitality Corp. will head to the private placement market.

The company plans to sell common voting shares sold at a minimum price of $3 each or the average trading price for the week before the day of the receipt of funds.

The offering is expected to be priced by the middle of the year.

"The private placement will give us a stronger balance sheet, fund the cash component of growth required by these and other recent acquisitions, fund anticipated expansion plans and permit us to refinance the remaining debt AFM currently has elsewhere," said AFM's chairman and chief executive officer Lawrence Horwitz in a statement.

"AFM has reported interim year-to-date results through third quarter 2004 that are significantly better than 2003 and expects to report a similar improvement for the entire year of 2004 compared to 2003. While we have used debt financing for acquisitions within the past year, with the significant upturn in AFM's results, we believe that equity financing appears to be a better alternative for all involved going forward.

"With the recent acquisition of Boutique Hotels & Resorts International, we expect to announce other similar acquisitions over the next few months for a combination of cash, notes and securities. While not certain as to the completion date or the amount, we hope to complete this private placement by mid-year."

Based in Toronto, AFM operates and opens franchise, management and membership agreements with hotels, restaurants and other businesses. The proceeds from the private placement will be used to expand the company's group of internet businesses and provide working capital for its InterActive reservations and marketing businesses. The remainder will be used for working capital and expansion.

AFM's stock closed unchanged at $0.80 on Wednesday.

PBB raises C$20 million

PBB Global Logistics Income Fund received agreements for its C$20,004,550 private placement.

The company will sell 1,153,000 subscription receipts at C$17.35 each. The receipts are exchangeable for units on a one-for-one basis upon the completion of the company's acquisitions of Unicity Integrated Logistics Inc. and Unicity Customs Services Inc.

CIBC World Markets Inc. was the lead underwriter in a syndicate that included National Bank Financial Inc. and Canaccord Capital Corp.

"It's a good deal," said one Canadian market source. "I think their acquisitions have a lot to do with it. It shows some stability and the company's stock is also strong."

Based in Fort Erie, Ont., PBB is a third-party international logistics services company. The proceeds from the private placement will be used to fund the company's acquisitions of Unicity Integrated and Unicity Customs.

The company's stock closed up C$0.20 at C$17.60 on Wednesday.

Devlan announces, upsizes deal

Devlan Exploration Inc. announced, then upsized, a private placement offering for C$17.25 million.

The company will issue 4,054,055 shares at C$3.70 each and 523,257 flow-through shares at C$4.30 each.

The private placement was originally announced Wednesday as a C$14 million offering of 3,243,244 common shares and 465,117 at the same prices.

Clarus Securities Inc. and Dundee Securities Corp. are the underwriters in the offering.

Devlan is a Calgary, Alta.-based oil and natural gas exploration, development and production company. The company plans to use the proceeds from the flow-through shares to fund the acceleration of its exploration-drilling program. The proceeds from the common shares will be used for general corporate purposes.

The company's stock closed down C$0.09 at C$3.85 Wednesday.

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