The last time Philom Bios Inc. (PBI) was the subject of a takeover bid, it started out with an insulting offer and ended when a lawsuit got in the way of a mutually agreed upon deal.
This time there is a handsome offer on the table, a happy board of directors and little chance the deal will be scuttled.
Novozymes, a Danish biotechnology company that is a world leader in the production of enzymes and micro-organisms, is making a cash offer to acquire all of the 3.9 million outstanding shares of Saskatoon-based Philom Bios for $6.50 per share, valuing the transaction at $25.6 million.
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PBI’s board of directors, officers and largest shareholders have already agreed to tender all their common shares to the offer.
“That group constitutes more than 70 percent of the outstanding shares of the company,” said company president Calvin Sonntag.
A minimum of 67 percent of the shares must be deposited to the offer as of Dec. 10, 2007, for the deal to go through.
Sonntag said the Novozymes offer is “completely friendly” and far superior to the one tendered by MicroBio RhizoGen Corp. in 2001. MBR’s initial offer was for $2.75 a share, a bid that was resoundingly rejected by Philom’s board of directors.
The two companies eventually agreed on a merger deal worth $5.25 per share but MBR backed out due to a lingering lawsuit between PBI and Dow AgroSciences that has since been settled.
“This is by far and away a superior offer to anything that was contemplated in those discussions,” said Sonntag.
MBR did not respond to an interview request for this story.
PBI shares are not listed on any stock exchange. Trades are made on an over-the-counter basis and are overseen by Union Securities. The last reported transaction was for $3.90 per share in February 2006.
“To our knowledge the shares have never traded hands for anything in excess of $4,” said Sonntag.
The next step will be for Novozymes to issue a bid circular, the formal offer to PBI’s approximately 250 shareholders. The offer will be open for a minimum of 35 days. PBI’s board is obligated to officially respond to that offer within 15 days.
Sonntag said reaction to the proposal has been “overwhelmingly positive” and the board has already unanimously resolved to recommend that all shareholders tender their common shares to the offer.
If the deal goes through, it will be business as usual in the short term for the employees of the company and the farmers who use Philom Bios’s inoculant products, like JumpStart, TagTeam and N-prove.
In the medium to long term, farmers can expect a broader array of products as PBI taps into Novozymes’ expertise and capital. The company had $1.3 billion in sales in 2006 and employs 4,500 people compared to PBI’s $14 million in sales and 75 employees.
Novozymes sells enzymes that are used in household detergents, transform starch into fuel, enhance food quality and boost nutrient levels in animal feed. It sells more than 700 products in 130 countries. Its interest in Philom Bios stems from an intent to enter the agricultural biologicals market.
PBI’s inoculants are designed to boost fertilizer efficiency in a variety of crops. So far, most of the company’s sales have been to pulse crop and canola farmers in Western Canada but the market has been expanding into the United States and Australia.
“I think (Novozymes) certainly does see some growth potential for our products in corn and soybeans,” said Sonntag.
