Sepracor Sued Over Dainippon's Low Offer Despite Absence of Competing Suitors

Last Updated Sep 10, 2009 12:45 PM EDT

Some Sepracor shareholders have sued the company's board alleging that their acceptance of Dainippon Sumitomo's acquisition offer of $23 a share, a premium of just 27.6 percent, isn't such a great deal. BNET suggested this might happen on Sept. 3.

Other attorneys are trawling for clients for their own securities class actions. Per Bloomberg, the suits allege:

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," lawyers for the Stationary Engineers Local 39 Pension Trust Fund said in its complaint.
That's a tough case to make, as pretty much every major U.S. pharma company has looked at Sepracor and passed. Credit Suisse analyst Scott Hirsch stated in a letter to investors:
In our view, if a US firm wanted Sepracor, that likely would've happened already, as there have been plenty of lookers over the years ... We think Dainippon Sumitomo is more interested in the sales platform and operating leverage than the revenue stream.
The plaintiffs may make more headway with their second claim, which is that Sepracor has signed a lock-in agreement that prevents a bidding war for the company. Bloomberg:
The 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, according to both complaints.
Knowing that any competing offer will likely be matched by Dainippon, any company considering a contest might simply not bother, thus putting a ceiling on the price of the stock.

Bottom line: Sepracor holders have to decide whether the company's not-promising pipeline would get the stock over $23 without the bid. If it would, then they should refuse to sell. But if that seems like a longshot, then Dainippon may be the best thing to happen to the company.