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With More than 20 Suitors for SRS Biz, Lion Breaks with SEC, Hires M&A Advisor


More than 20 companies are currently bidding for Lion Bioscience's bioinformatics assets, several sources associated with the transaction told BioInform last week, and the Heidelberg, Germany-based firm is tying up a few loose ends in its effort to close the sale by September.

Separately, on May 19, Lion filed to terminate its registration with the US Securities and Exchange Commission — a follow-on to its delisting from the Nasdaq exchange in late December [BioInform 11-22-04]. The move is expected to provide "significant cost savings" for Lion "as a result of being relieved of its SEC periodic reporting requirements," the company said in a statement.

Lion said previously that it expected to save as much as €400,000 ($500,600) per quarter by withdrawing from the US public markets. The company also expects the deregistration to help speed the sale of its bioinformatics assets.

The company has also secured Munich-based investment bank Viscardi as its exclusive advisor for the sale of its bioinformatics assets. Ludwig Felber, managing director of Viscardi's Health Care practice, told BioInform that the firm has already contacted a number of "potential acquirers" of Lion's bioinformatics business. While he declined to specify the number of interested parties, he said, "It's a lot. It's a high number."

Lion CFO Peter Willinger also declined to provide details on the number of interested parties, but said that it's "much more than 10 — it's more than 20." Several other sources familiar with the transaction who declined to be named on account of their involvement in the process said that the number of potential buyers could be as high as 50 or 60.

Felber said it was "tough to say" whether a sale could be completed by September, but Willinger said that the company is "quite confident that we can close the deal in the third quarter."

Neither Felber nor Willinger would discuss the current asking price for Lion's bioinformatics assets, but the large number of interested parties will likely drive the bidding significantly higher than the €680,000 price tag that Lion had initially set for a proposed management buyout of the Cambridge, UK-based SRS business [BioInform 03-21-05].

Willinger said that the high level of interest should give Lion an edge in the negotiating room. "It would be a different scenario if we just had one or two interested parties," he said. "Now we have a lot of parties, so this means if one party does not accept the time frame or the [non disclosure agreement] or things like that, this would put us in a quite comfortable situation to say, 'Either stick to the rules or other parties are [willing to] accept them.'"

At least one "interested party" is still in the running. Ian Humphrey-Smith — a Lion stockholder who triggered the current bidding war during the company's March 24 shareholder meeting by claiming that two venture capital firms were interested in buying the firm's assets [BioInform 03-28-05] — told BioInform at the Bio-IT World conference earlier this month that his independent consulting company, Deomed, is still negotiating a sale on behalf of FM Fund Management and Zapis Capital Group.

Despite the recent surge in interest from numerous other companies in Lion's bioinformatics business, "we're still looking at buying the assets," he said, adding that "we're awaiting legal advice before proceeding further."

One drawback of the bidding process, Humphrey-Smith said, is that Lion is "asking for bids up front, and we still don't know exactly what we're bidding on."

Walking Away from Wall Street

Willinger said that the termination of Lion's SEC registration is a "cornerstone" of the dramatic restructuring it began last November, and will help speed the sale of its bioinformatics assets.

Freeing itself of SEC obligations is "an important part of the restructuring, because a lot of [Lion's] costs are related directly to the registration at the SEC," Willinger said, citing Sarbanes-Oxley requirements and fees associated with filing its annual report and other SEC documents as particular financial burdens. "Therefore it was quite important for us to get this deregistration done," he said.

Lion delisted its American Depositary Shares from Nasdaq and terminated its American Depositary Receipt facility after the end of trading on Dec. 22. Last week, Lion said that JP Morgan Chase Bank had sold on the German stock market "the underlying ordinary shares as to which [Lion's] ADSs had not been surrendered" to the bank by Feb. 22.

Willinger said that there were about 1 million outstanding ADRs.

The bank will hold the proceeds of the sales for the pro rata benefit of registered holders of ADSs that have not been surrendered, and these holders may contact JP Morgan for their share, the company added.

Lion expects the termination to become effective 90 days after its May 19 filing with the SEC.

The company said it will continue to provide shareholders financial information as required by the Frankfurt exchange and German law.

— Bernadette Toner ([email protected])

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