BioSphere Settles Merger Suit (revised) - Analyst Blog

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) -- and not cancer treatment specialist

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), as was earlier reported erroneously -- has reportedly reached a settlement with shareholders, who filed a lawsuit to block its proposed merger with Utah-based medical product maker

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Merit Medical agreed to acquire BioSphere on May 13, 2010, for roughly $96 million in cash. The offer (valued at $4.38 per BSMD shares) represented a 54% premium over BioSphere’s closing price of $2.84 on May 12. BioSphere’s shares spiked 50% following the announcement of the merger.

The transaction, which has been already approved by the Boards of both companies, is subject to closing conditions (including the approval of BioSphere shareholders and antitrust clearance) and is slated for completion in third-quarter 2010.

However, some BioSphere shareholders filed a class-action suit in June 2010 in the Delaware Chancery Court for an injunction against the merger. The shareholders accused the directors of BioSphere for breaching their fiduciary duties in connection with the proposed deal by failing to maximize shareholder value and obtain the best financial and other terms.

Subsequently, the shareholders amended the lawsuit in mid-July 2010 by adding BioSphere as a defendant. They also indicted that the company’s regulatory filing failed to disclose adequate information about the merger, and instead, provided misleading information.

In a recent filing with the Securities & Exchange Commission (SEC), BioSphere stated that the settlement, which is subject to court approval, would dismiss all the claims in the class-action suit. The final hearing on the settlement is due on Nov 4, 2010.

Merit Medical expects acquisition-related costs (such as transaction fees and restructuring costs) to be dilutive to its earnings in calendar year 2010, but accretive in 2011 and beyond. Besides, it anticipates cost synergies through reduction of sales, marketing and administrative expenses.

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