Adolor Corporation Investors File Lawsuit Against Directors To Stop Takeover

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Company Name(s): 
Adolor
Case Name: 
Adolor Deal Case 11/14/2011
Case Status: 
Lawsuit Filed
Affected Securities
NASDAQ: ADLR
Lawsuit Overview
Type of Lawsuit: 
Mergers and Acquisition
Date Filed: 
11/14/2011
Summary: 

San Diego, Nov. 14, 2011 (Shareholders Foundation) -- An investor in shares of Adolor Corporation (NASDAQ: ADLR) filed a lawsuit in State Court against directors of Adolor Corp. in effort to block the proposed takeover of Adolor by Cubist Pharmaceuticals.

According to the complaint the plaintiff alleges that the defendants breached their fiduciary duties arising out of the attempt to sell Adolor Corp. at an unfair price via an unfair process.

On Monday, October 24, 2011 Adolor Corporation (NASDAQ: ADLR) and Cubist Pharmaceuticals, Inc. (NASDAQ: CBST) had announced that they have signed an agreement under which Cubist harmaceuticalswill acquire all of the outstanding shares of Adolor Corp. for $4.25 per share in cash, or approximately $190 million on a fully-diluted basis, net of Adolor’s third quarter 2011 cash balance. In addition to the upfront cash payment, each Adolor stockholder will receive one Contingent Payment Right (CPR), entitling the holder to receive additional cash payments of up to $4.50 for each share they own if certain regulatory approvals and/or commercialization milestones for ADL5945 are achieved. Adolor’s lead development program is ADL5945, an oral, peripherally-restricted opioid receptor antagonist. The total transaction is valued at up to $415 million, net of Adolor’s third quarter 2011 cash balance.

However, the plaintiff alleges that the offer undervalues Adolor and “Adolor, if properly exposed to the market for corporate control, would bring a price materially in excess of the amount offered in the Proposed Transaction”. In fact, Adolor Corporation’s performance increased over the past years. Its annual Revenue rose from $9.12million in 07 to $43.30million in 2010 and its Net Loss decreased from $48.44million for 2007 to $27.27million in 2010. For the second quarter 2011 Adolor Corporation reported an increase in its second quarter Revenue from $10.95million last year to $14.19milion this year and its second quarter Net Loss decreased from $8.28million to $1.84million.

Furthermore, at least one analyst has set the high target price for NASDAQ:ADLR shares at $8 per share.

In addition, so the plaintiff, despite the unfair price, the merger agreement has a number of provisions, such as a $10million termination fee and a no-solicitation provision, that make it more difficult for another buyer to purchase the company.