Market expects higher Facet bid; Cisco may stick to offer terms; Adaptec holds deal interest

By Cristal Cody

Tupelo, Miss., Oct. 16 - Biogen Idec Inc. stuck to its $14.50-a-share offer for Facet Biotech Corp., but investors and market observers continue to expect the company to raise its $356 million offer, an analyst told Prospect News on Friday.

Biogen on Friday extended its hostile bid, which was scheduled to expire on Monday, to Dec. 16.

Meanwhile, a market observer said Friday that Cisco Systems, Inc. is just as likely to stick to its $3 billion bid as to offer more for Tandberg ASA after a shareholder group said they would not support the terms.

In other situations, Adaptec, Inc., which is exploring options in the wake of a proxy battle, does have some assets that would spark deal interest, an analyst said in an interview Friday.

Moving to Wall Street, equities fell and sent the Dow Jones Industrial Average back below 10,000 points.

The Dow lost 67.03 points, or 0.67%, to close at 9,995.91.

The Standard & Poor's 500 index fell 8.88 points, or 0.81%, to 1,087.68, and the Nasdaq Composite index closed down 16.49 points, or 0.76%, at 2,156.80.

Biogen expectations

Biogen said in a statement Friday that about 28,336 shares of Facet stock have been tendered in its proposal.

"Our offer price remains unchanged at $14.50 per share in cash, which is a substantial premium to where Facet Biotech's stock was trading prior to our offer," Biogen president and chief executive officer James C. Mullen said in the statement. "Biogen Idec views the acquisition of Facet as desirable but not a 'must have'. We already own a 50% interest in daclizumab, the drug Biogen Idec is jointly developing with Facet Biotech for the treatment of relapsing multiple sclerosis. We do not intend to overpay for the rest."

Cambridge, Mass.-based Biogen has partnered with Facet since 2005 to develop cancer and multiple sclerosis drug treatments.

Biogen launched its hostile tender offer to acquire Facet on Sept. 21. The bid then represented a premium of about 64% over the $8.82 closing price of Facet's stock on Sept. 3, the last trading day before Biogen announced its transaction plans.

Facet shares now trade well above Biogen's bid. Shares closed on Friday up 11 cents, or 0.61%, at $18.03. The stock has traded from $5.86 to $50.00 over the past year.

Facet's board has unanimously rejected the offer.

Eun Yang, an analyst with Jefferies & Co., told Prospect News on Friday she expects Biogen will raise the price by about $5.00 a share.

"My guess is that Biogen is going to up the number," Yang said.

Facet "carries about $15.00 a share in cash," she said. "Even if [Biogen is] paying $20.00, that's only a $5.00-a-share purchase price. Even if they pay $200 million extra on top of the cash they're getting from Facet, it's not huge."

As of Aug. 31, Redwood City, Calif.-based Facet said it had about $364.3 million, or $14.55 a share, of cash, marketable and investment securities and restricted cash. The company was created in December as a spinoff from Incline Village, Nev.-based PDL BioPharma, Inc.

Shares of Biogen lost 59 cents, or 1.18%, to close at $49.20.

PDL shares rose 8 cents, or 0.89%, to $9.05 on Friday.

Cisco maneuvers Norway deal

A group of 21 shareholders with 24% of Tandberg shares said Thursday it did not plan to tender its shares at Cisco's current terms.

On Oct. 1, San Jose, Calif.-based Cisco said it will pay 153.50 Norwegian kroner a share for the Norwegian video conferencing company. Tandberg's board recommended shareholders accept the bid, but Cisco needs approvals from at least 90% of Tandberg shares to attain complete control.

While a Cisco price bump to 165 Kr a share likely would be more enticing to Tandberg investors, Cisco is just as likely to take another route, a market source said Friday.

"We believe that Cisco would be better off playing hardball to test whether it can achieve 50% control without a bump," the market observer said. "Cisco also has a track record of successfully closing deals without revising the offer consideration once the terms are agreed, although Tandberg is the first deal for Cisco outside the U.S."

The transaction is expected to close in the first half of 2010.

Cisco shares dropped 35 cents, or 1.42%, to $24.02 on Friday.

Tandberg's stock closed up Kr 2.60, or 1.67%, at Kr 157.90.

Adaptec fights for control

Adaptec is considering its options while fighting a proxy battle against hedge fund Steel Partners II, LP.

In a letter sent to shareholders on Thursday, Adaptec said a financial adviser hired in April is reviewing the Milpitas, Calif.-based company's alternatives to sell the company or to make an acquisition.

"The board as a whole has long been - and continues to be - open to considering options that would increase value to stockholders, including an acquisition or sale at the right price, or a return of cash to stockholders," Douglas E. Van Houweling, a director of the company, said in the letter. "But we believe that - in the face of today's depressed valuations and before Adaptec can deliver sustainable sales growth from its new products - the time for a sale is not right."

Proxy advisory firm Glass, Lewis & Co. has recommended shareholders elect Adaptec's directors up for election to the board at the annual shareholders meeting on Nov. 10.

Steel Partners, which holds an 11% stake in Adaptec and is led by activist investor Warren Lichtenstein, is seeking to replace the data storage technology firm's CEO and a director.

Mike Crawford, an analyst with B. Riley & Co., LLC, told Prospect News on Friday that the proxy fight has amounted to a near daily public battle of regulatory filings.

But many investors are waiting on RiskMetrics Group Inc., which is expected to release its report on the proxy fight in the week ahead, he said.

"I believe what RiskMetrics recommends will go a long way toward deciding this issue," Crawford said. "Shareholders facing which way to vote, I would imagine, are waging whether to get the more visible amount of limited upside today by exiting the business that some directors say is failing or whether to give the management more time."

Although the company said the time is not right for a sale, there are opportunities to gain a higher value than the current stock price, said Crawford, who estimates a target stock price of $3.72 a share, which would value Adaptec at about $446.4 million.

"In my opinion, if the company chose to sell off its assets now, I think the end result would be in excess of the existing cash on the balance sheet, which is where the stock is trading," he said. "The company does have some IP and design wins that would be of interest in excess of liabilities."

Adaptec shares fell 5 cents, or 1.52%, to close Friday at $3.24. The stock has traded from $2.20 to $3.71 over the past year.

Mentioned in this article:

Adaptec Inc. Nasdaq: ADPT

Biogen Idec Inc. Nasdaq: BIIB

Cisco Systems, Inc. Nasdaq: CSCO

Facet Biotech Corp. Nasdaq: FACT

PDL BioPharma, Inc. Nasdaq: PDLI

Tandberg ASA Oslo: TAA

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