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Sirna's Shaky Shareholder Settlement Sheds Light on Merck Acquisition

NEW YORK (GenomeWeb News) — Merck last week closed its $1.1 billion acquisition of Sirna Therapeutics, but not before the RNAi shop managed to tentatively muzzle a trio of shareholder-led lawsuits accusing its brass of double-dealing in their negotiations with Merck, according to a filing with the Securities and Exchange Commission.
 
The resulting settlement-in-principle, which Sirna said can fall apart at any time, compelled Sirna to disclose information about how it negotiated the deal, which showed that it had been in negotiations with another company about a possible buyout.
 
According to the SEC filing, Sirna said it would reduce to $38 million from $42.1 million the termination fee it would have been required to pay Merck if the deal fell through.
 
The settlement-in-principle also requires Sirna to make additional disclosures to its investors to address the issue of whether its management sought the best price possible for the company when it negotiated the acquisition.
 
According to Sirna, after the company had received an initial offer from Merck late last year, it received a written offer from another, undisclosed, company proposing to acquire Sirna for between $10 and $12 a share, which was higher than Merck’s original offer.
 
Merck later sweetened its offer to $13 a share, which was “higher than the highest range of any third-party offer,” Sirna noted in the SEC filing. Additionally, “no other interested party submitted a proposal after Merck’s final proposal was received,” the company said.
 
The settlement-in-principle also calls for Sirna to pay $500,000 to the plaintiffs’ legal counsel to cover fees and expenses.
 
“We and the other defendants vigorously deny all liability with respect to the facts and claims alleged in the lawsuits,” Sirna said in the SEC filing, dated Dec. 20, 2006. “However, to avoid the risk of delaying or otherwise imperiling the merger, and to provide information to our stockholders at a time and in a manner that would not cause any delay of the merger, we and our directors agreed to the settlement.
 
As originally reported by GenomeWeb News sister publication RNAi News, three shareholders filed separate lawsuits last year attempting to block the sale and accused Sirna’s management of negotiating the deal for their own financial benefit.
 
The suits allege that Merck’s purchase of Sirna “is wrongful, unfair, and harmful to Sirna’s public stockholders, and represents an effort by [Sirna’s directors] to aggrandize their own financial position and interests” at the expense of ordinary shareholders.
 
The lawsuits specifically charge that Sirna’s President and CEO Howard Robin and the firm’s board members violated their fiduciary duties “insofar as they stood on both sides of the transaction and engaged in self-dealing and obtained for themselves personal benefits, including personal financial benefits.”
 
Sirna’s directors “are unwilling to share the lion’s share of [the company’s potential success] with the company’s shareholders, choosing instead to sell the company to Merck … and cash out Sirna shareholders for inadequate consideration,” the lawsuits charge

 
The complete version of this article appears in this week’s RNAi News.
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