Ascendis Health for the second consecutive trading day warned its shareholders not to pay attention to “unhelpful” market speculation in respect of a potential offer, which did not constitute a formal offer, while stating that there would be no value left to shareholders if the group recapitalisation failed and the firm ended up in an ensuing business rescue process.
On Friday the shares in the troubled health and wellness company plunged 10 percent after it debunked market speculation, saying a firm offer had not occurred.
On Monday, the company, which is fighting its way out of debt, informed shareholders that it had now become aware that a redacted copy of a letter addressed to the board of directors of Ascendis Health, containing details of a non-binding conditional offer, was published on Twitter, although the relevant tweets were subsequently removed.
The recent market speculation in relation to a potential “offer” for Ascendis Health had been “unhelpful” at a time when shareholders should be focusing on the circular and the general meeting on October 4 and at a time when no actionable offer has been made, the group said.
Ascendis Health chief executive Mark Sardi said: “I would encourage shareholders to vote in favour of the group recapitalisation on 4 October. If shareholders do not support the transaction, they are likely to receive no value in the ensuing business rescue process.”
If the group recapitalisation was not implemented, for any reason, including failure to receive adequate shareholder support, the lenders would most likely take control of the European assets and a business rescue process in South Africa would be initiated, it said.
“In a business rescue, shareholders rank behind all other creditors and it is likely the outstanding senior debt will exceed the proceeds from any disposal process implemented by the business rescue practitioner. Therefore, if the recapitalisation fails, the most likely result is that there will be no return to shareholders,” it warned.
Ascendis said it wanted to explain to shareholders why the letter, released on social media, did not constitute an “offer” to shareholders and ensured that they were aware of the provisions of the Financial Markets Act, as they related to insider trading and market manipulation.
On August 19, the company had received an unsolicited telephone call from representatives of certain investment firms, based in the US (the third party), who outlined a proposal to amend the group recapitalisation that had been announced on May 12 and requested the company consider a transaction that would involve them potentially acquiring control of Ascendis.
On August 20, a “Memo of Information” was received from the third party, but this did not constitute a firm intention.
On August 25, the company received a “non-binding indicative expression of interest”from the third party, and the firm said it was concluded that a SENS announcement would be premature. On September 2, the company received a revised letter entitled “Conditional Offer” and in response and with the guidance from the Takeover Regulation Panel the company sent out a JSE SENS announcement on Friday, clarifying the situation.
Ascendis gave an overview of the key terms of the proposed transaction received from the third party, which were that an agreement had to first be reached between the third party and the lenders to reduce the level of reinstated debt in the group recapitalisation from €15 million (R254m) to €5m.
The third party would tender for 100 percent of the shares of Ascendis Health via the issue of preferred stock in the third party at a purchase price of R1.50 per share.
The preferred stock would have a coupon of 5 percent with a five-year term; while tendering investors would be given a warrant to purchase 20 percent of their tendered shares at the end of the five years at a price of R1 per share.
The third party had proposed to invest $20 million (R286m) into Ascendis Health for the sole purpose of additional working capital and growth purposes.
However, Ascendis said the debt deal would not be changed. The lenders had indicated to the company that the terms of the group recapitalisation were not subject to any further negotiation.
Ascendis also said it was no cash offer. Essentially shareholders would receive a debt-like instrument where they were no longer ordinary shareholders in Ascendis Health, but became lenders to the third party with the possibility of receiving R1.50 per share in five years’ time.
As regards the $20m that the third party had proposed to invest in Ascendis Health, there also had been no guarantee or cash confirmation.
It said the proposed transaction as contemplated in the letter did not appear to be in the best interests of Ascendis Health or its shareholders.
In intraday trade on Monday, Ascendis Health’s shares were 1.79 percent lower at 55 cents.
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