NEW YORK (GenomeWeb News) – Harvard Bioscience's board of directors on Friday unanimously rejected a buyout offer from Skystone Advisors for $5 a share.
Skystone, a Cayman Islands-incorporated LLC with operations in Boston, has been investing in Harvard Bio since 2005 and currently owns around 15 percent of the company. Its offer represents a premium of around 11 percent over Harvard Bio’s trading price of $4.50 Friday afternoon, and values the firm at roughly $154 million based on 30.8 million shares outstanding.
In a letter to Skystone Managing Member Kerry Nelson, Harvard Bio CEO Chane Graziano said that the offer undervalues the firm. "We believe our current strategy of combining tuckunder acquisitions with organic growth can deliver better value to our stockholders than the Skystone offer," he said.
Skystone said in its offer that the $5 bid is “a full price” and an “attractive opportunity” for shareholders, particularly because Harvard Bio’s shares have fallen 19 percent year-to-date, despite an increase in earnings per share of around 9 percent year over year.
In a letter to Harvard Bio’s board of directors that was filed Friday with the US Securities and Exchange Commission, Skystone's Nelson said the firm “needs to execute a plan to roughly double its revenue and pretax profits within the next three years.”
She said that given Harvard Bio’s single-digit organic growth rate, the only way it can double its revenue and profits is though an aggressive accretive acquisition strategy.
“Historically and recently, the timing of these tuck-in acquisitions has been inconsistent due to the often lengthy process of buying small privately owned businesses, management bandwidth, and the company’s capital constraints,” said Nelson. “We believe there is significant risk to successfully executing the necessary acquisition strategy while simultaneously handling the costs, limitations, and distractions of being a public company.”
Earlier in the month, Harvard Bioscience sold its Genomics Solutions Division and its Maia Scientific Business to Digilab for $1 million in cash and a 20 percent earn-out of revenue over a three-year period.
Harvard Bio also said last week it plans to buy back up to $10 million of its common stock through the open market or through private transactions over the next two years.
Nelson said that this move “will only increase the illiquidity problem,” and that the buyback is too small to entice shareholders who want to sell their shares. In effect, the move is “a tacit admission that currently management cannot yield a better return for shareholders through more aggressive capital deployment in acquisitions or higher research and development spending,” she said.
Graziano disagreed with this assessment, saying in his letter to Nelson that the share repurchase "confirms our optimism about the future prospects for the company."
Nelson noted that Skystone would be willing consider an increased offer if Harvard Bio provides “additional information demonstrating greater value.”