Sepracor Inc Investors File Lawsuit Over Takeover

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Company Name(s): 
Sepracor
Case Name: 
Sepracor Inc Investors File Lawsuit Over Takeover
Case Status: 
Lawsuit Filed
Affected Securities
NASDAQ: SEPR
Lawsuit Overview
Type of Lawsuit: 
Mergers and Acquisition
Date Filed: 
09/03/2009
Court of Filing: 
Delaware Chancery Court
Summary: 

Two investors in Sepracor Inc filed lawsuits in Delaware Chancery Court on behalf of current investors Sepracor Inc (Public, NASDAQ:SEPR), who purchased the shares before September 03, 2009, over potential breaches of fiduciary duty and other violations of state law in connection with an alleged unfair takeover price.

According to the complaints the plaintiff alleges breaches of fiduciary duty and other violations of state law by the Board of Directors of Sepracor Inc (Public, NASDAQ:SEPR) arising out of their attempt to sell Sepracor Inc to. Dainippon Sumitomo Pharma. Sepracor Inc. (Nasdaq: SEPR) and Dainippon Sumitomo Pharma Co., Ltd. (TSE: 4506) announced on September 03, 2009 that they have entered into a definitive agreement pursuant to which Dainippon Sumitomo Pharma will acquire Sepracor for approximately $2.6 billion through a cash tender offer of $23.00 per share, followed by a merger to acquire all remaining outstanding Sepracor shares at the same price paid in the tender offer. According to Sepracor the tender offer price represents a 48.0% premium to Sepracor’s average stock price over the last six month period ending on September 1, and a 27.6% premium over the closing price of Sepracor’s common stock on September 1, 2009.

According to the complaints the price is unfair and inadequate. One plaintiff alleges that Sepracor directors “did not undertake to canvas the market prior to entering into the proposed merger and thus failed to inform themselves of the inherent fair value of the company”. The other investor accuses that Sepracor directors failed to conduct an appropriate sales process and implemented preclusive deal protections that will inhibit an alternate transaction.

According to both complaints the proposed deal provides for a $77.4 million termination fee and contains restrictive provisions such as a “no solicitation” condition which gives Dainippon time to match any other offer. Sepracor Inc., located in Marlborough, MA, is a research-based pharmaceutical company engaged in the discovery, development and commercialization of differentiated products that are prescribed principally by primary care physicians and certain specialists. Sepracor is concentrating its product development efforts in two therapeutic areas: respiratory diseases and central nervous system (CNS), disorders. Sepracor Inc reported in 2007 Total Revenue of $1.22523billion with a Net Income of $58.33million and in 2008 Total Revenue of $1.29229billion with a Net Income of $515.11million. Shares of Sepracor Inc ( NASDAQ: SEPR) traded at $23.47 per share after the announcement and at $17.97 per share on the day before the announcement. SEPR shares were down from over $30 per share in 2008 and over $60 per share in 2007. SEPR shares reached over $150 per share in 2000.