RNS Number : 3035N
Zentiva N.V.
13 February 2009
ZENTIVA N.V.
UPDATE ON THE EXTRAORDINARY GENERAL MEETING HELD ON
FEBRUARY 9, 2009
Zentiva N.V. ('Zentiva' or the 'Company') is pleased to provide the following update on its Extraordinary General Meeting of shareholders held in Amsterdam, the Netherlands, on February 9, 2009 (the 'EGM'):
Agenda Item 1 - Opening
Mr. Brad Wilson, the Vice-Chairman of the Board of Managing Directors (the 'Board') and a non-executive director of the Company chaired the EGM instead of Mr. Jiří Michal, the Chairman of the Board and CEO of the Company, who was not present at the EGM for personal reasons. Mr. Brad Wilson was nominated by the Board to chair the EGM pursuant to Article 24(1) of Zentiva's Articles of Association.
Mr. Jan Scholts, a non-executive director of the Company, and Mr. Petr Šulc, the CFO of Zentiva, were also present at the EGM.
Agenda Item 2 - Announcements
Mr. Krishna van Zundert was appointed as secretary of the EGM.
The Chairman explained that on the agenda of the EGM, there were no resolutions to vote on, and therefore all the agenda items were non-voting. The Chairman further explained that during the EGM, shareholders would have an opportunity to ask questions and request clarification as to the relevant agenda points.
Based on pre-EGM registrations, 13,450,362 shares were registered for the EGM, which represented 35.27% of Zentiva's total issued capital. At the start of the EGM, shareholders in respect of 12,122,464 shares were physically present or represented (either personally or through a proxy) for the EGM, which represented 31.79% of Zentiva's total issued share capital.
Agenda Item 3 - Discussion of the recommended voluntary takeover offer by Sanofi-Aventis Europe
The next agenda item was to discuss the recommended voluntary takeover offer by Sanofi-Aventis Europe. This was a non-voting item.
Mr. Brad Wilson provided the following overview to the shareholders present at the EGM:
'You will recall that on June 17, 2008, Anthiarose Limited, a subsidiary of PPF Group N.V., officially published its unsolicited voluntary takeover offer for Zentiva at a price of CZK 950 per share (the 'PPF Offer'). Shortly after the PPF Offer was published, the Zentiva's Board published on June 20, 2008 its position statement with respect to the PPF Offer, and the Board recommended shareholders not to accept the PPF Offer. The PPF offer was the main topic of our Extraordinary General Meeting which was held on July 9, 2008.
On July 22, 2008, Anthiarose Limited published its intention to withdraw the PPF Offer. Following regulatory clearance, the PPF Offer was officially withdrawn as of July 30, 2008, and is no longer outstanding.
You will also recall that on July 11, 2008, Sanofi-Aventis officially published its unsolicited voluntary takeover offer at a price of CZK 1,050 per share (the 'Original Sanofi Offer').
Zentiva's Board published on July 18, 2008 its position statement with respect to the Original Sanofi Offer and recommended shareholders not to accept the Original Sanofi Offer. The Original Sanofi Offer was the main topic of our Extraordinary General Meeting which was held on September 3, 2008.
Although much has happened behind the scenes in the meanwhile, on September 22, 2008, Zentiva and Sanofi-Aventis announced an agreement on the unanimous recommendation by Zentiva of an intended improved offer of CZK 1,150 per share by Sanofi Aventis Europe (the 'Improved Sanofi Offer'). We will refer to the agreement as 'Merger Protocol', which is a technical term for such a kind of agreement.
Sanofi-Aventis Europe officially made the Improved Sanofi Offer on October 1, 2008. On the same date, Zentiva issued a press release in which the Board of Zentiva recommended the Improved Sanofi Offer.
The Extraordinary General Meeting being held today was called on January 7, 2009 in order to discuss the Improved Sanofi Offer.
The Improved Sanofi Offer expires in less than two weeks, on February 20, 2009.
The Improved Sanofi Offer represents a 25.5% premium over Zentiva's closing price of CZK 916.60 on April 30, 2008, the last trading day before an intention to make an offer for Zentiva was announced by Anthiarose Limited. It also represents an improvement of 9.5% over the Original Sanofi Offer.
Zentiva's share price has significantly outperformed the PX index and comparable peers of Zentiva since the PPF Offer intention was announced. Specifically, since April 30, 2008, Zentiva's share price has increased 23.7% compared to the PX index, which has decreased 53.2% over the same period. In the past 6 months, Zentiva's share price has increased 6.4% compared to the PX index, which has fallen 48.0%.
Throughout the whole takeover process the Board took a number of actions guided by the requirement to act in the interest of all shareholders and other stakeholders of the Company.
In summary, the Board has undertaken a comprehensive and thorough review of options available to the Company and the Board has acted with diligence and care, and at all times with the focus on achieving the best result for shareholders and other stakeholders.
On the basis of this process and as a result of it, the Board continues to recommend unanimously Zentiva's shareholders to accept the Improved Sanofi Offer.
You can find more detail about this recommendation by the Board in the Company's press releases published on September 22, 2008 and October 1, 2008.'
Mr. Petr Šulc, the CFO of the Company, then gave a presentation explaining in more detail the various points that Mr. Brad Wilson already mentioned before (see slides 10 through 17 of the attached presentation).
Following this presentation, Mr. Brad Wilson invited shareholders present at the EGM to ask questions to the Board. Three shareholders (or representatives of shareholders) asked questions and, after a short break, Messrs. Brad Wilson and Petr Šulc explained as follows:
With respect to questions from the first shareholder:
The shareholder inquired how is it possible that a takeover bid for 100% of Zentiva shares (including shares held in the form of global depositary shares) is subject to a 50% acceptance condition.
Mr. Petr Šulc explained that the Sanofi Improved Offer is with respect to up to 100% of Zentiva shares. Therefore, it depends on the level of acceptances what shareholding Sanofi-Aventis Europe will achieve. If the level of acceptances is too low, i.e., below the threshold stipulated by Sanofi-Aventis Europe in its offer memorandum, there will be no settlement of the Improved Sanofi Offer and all tendering shareholders will continue to hold their shares.
The shareholder further inquired how is it possible that the Board continues to recommend unanimously Zentiva's shareholders to accept the Improved Sanofi Offer, if there is no voting on this at the EGM.
Mr. Petr Šulc explained that the word 'unanimous' refers to the decision of the Board to recommend the Improved Sanofi Offer, and it does not mean that all shareholders would have to 'unanimously' accept the Improved Sanofi Offer or that they would be voting on the Improved Sanofi Offer. It is up to each shareholder to decide whether he or she will tender his or her shares into the Improved Sanofi Offer. The Board in this respect only provides a recommendation.
With respect to questions from a representative of the second shareholder:
The representative stated that the shareholder had sent a number of questions in writing to the Company before the EGM and had requested that both the questions and answers be put on the website of the Company. He inquired why the questions and answers had not been put on the Company's website.
Mr. Brad Wilson firstly thanked the shareholder for sending the relevant questions in writing in advance. Then he explained that the proper forum for asking questions is the EGM and that the questions have actually to be asked at the EGM so that shareholders present can hear these. He also noted that the cover letter from the shareholder indicated that the questions sent to Zentiva 'may be asked' and 'other questions could also be asked' at the EGM. The representative of the shareholder therefore read the questions out loud.
The questions have been answered by the Company as follows:
Question: In its letter dated 26 September 2008 (sent shortly after the publication of the improved Sanofi-Aventis offer), Anthiarose requested that the Board disclose all of the relevant information about the transaction between Zentiva and Sanofi-Aventis to the shareholders in relation to the improved bid of Sanofi-Aventis and to convene an EGM at which the shareholders could discuss the improved offer of Sanofi-Aventis. Can you please explain in detail why in your letter of October 6, 2008 you refused to honor this legitimate request?
Mr. Brad Wilson answered the question:
'Zentiva considers that all relevant information has in fact been disclosed.
On September 22, 2008, Zentiva publicly announced that an agreement has been reached with Sanofi-Aventis Europe whereby Sanofi-Aventis Europe would improve its then outstanding offer by CZK 100 to CZK 1,150, and whereby Zentiva Board unanimously recommends the Improved Sanofi Offer.
The press release published on September 22, 2008 contained all material information regarding this transaction. By material information we mean 'inside information' within the meaning of the Market Abuse Directive. In short this includes all precise information that is not public and that, if disclosed, could have a significant impact on the price of Zentiva shares.
The Board of Zentiva was very mindful to ensure that all material aspects of the transaction, in particular of the Merger Protocol, were disclosed. With respect to the content of the Merger Protocol which was not disclosed, the Board simply concluded, that this information was not material.
Zentiva thus complied with all applicable disclosure laws and regulations. What is more, Zentiva acted fully in line with international market practice. We repeat that disclosure of the whole document is not legally required and is not market practice.
In addition, the parties of the Merger Protocol are bound by a confidentiality obligation towards each other to protect their legitimate interests. Disclosure of the Merger Protocol in its entirety would be a breach of that obligation.
These are the main reasons why Zentiva did not feel it was appropriate to disclose additional details in response to PPF's request. To the extent that PPF's request only related to 'material' information, such information was made public before the request was made.
As regards the EGM, PPF's letter of 26 September 2008 did not represent a formal request for an EGM. PPF merely indicated its expectation that an EGM would be held.
At that time, the Board had not decided whether to hold the EGM and if appropriate, at what time. First, the Company was under no obligation to hold an EGM. Second, attendance during the previous two EGM's was not high. Third, no shareholder, not even PPF, asked questions during the previous EGM which discussed the Original Sanofi Offer. Fourth, it was not clear how long the European Commission process would last and when exactly would the offer period end. Fifth, other than in the PPF letter, the Company received no indication from any other shareholder that there would be a desire for an EGM.
With these considerations in mind, the Board left the question of an EGM open and advised PPF that if a decision to convene an EGM is made, a proper convening notice would be published. The Board took the view in January that it would be appropriate to hold an EGM, for a number of reasons (see below).'
Question: You have now convened for 9 February 2009 the EGM that we had proposed in September 2008. Can you please explain in detail why you decided to convene an EGM now whereas you refused to convene such EGM in September?
Mr. Brad Wilson answered the question:
'We already explained why no EGM was convened in September 2008.
Early in January 2009 the Board decided to convene this EGM for several reasons. First, the end of the offer period was approaching and the Board believed that no other extension would be necessary. Note that the present EGM's timing is similar to the timing of the others: about 2 weeks ahead of the scheduled closing dates. Second, PPF showed persistent interest in learning about the Board's recommendation of the Improved Sanofi Offer. Third, the Board expected the European Commission to issue its decision on or around 4 February 2009 and did not feel that an EGM before the decision was known would be useful to shareholders. Fourth, an EGM shortly before the end of the offer period would create positive publicity and alert shareholders to the approaching end of the offer period. Fifth, given the length of time since the original recommendation and the developments in the capital markets, the Board believed it was appropriate to present its views to shareholders once more, ahead of the offer expiry.'
Question: Can you please explain in detail what steps have been taken by the Board in order to find and approach any other investors, strategic or otherwise (other than Sanofi-Aventis), to make a bid for Zentiva - possibly on terms more favorable for the shareholders?
Mr. Petr Šulc answered the question:
'Answer to this question has mostly been covered by our previous presentation. We repeat that the Board considered, in cooperation with its advisors, a broad range of transactional alternatives, all with the objective of maximizing shareholder value. These included entry of a third party investor, for instance through a takeover bid, a legal merger, or through an issue of new shares. The Board considered possible corporate restructurings, for instance through a break-up, a disposal of assets or through an acquisition. The Board also considered financial restructurings, for instance through share buybacks or issuance of debt.
The Board also extensively considered the option to remain independent, but ultimately decided that the Improved Sanofi Offer offered superior value to shareholders.
As stated in our presentation, our advisors Merrill Lynch contacted almost 40 parties, ranging from global pharma companies, generics companies, financial sponsors and other potentially interested parties. All of these parties were offered the opportunity for due diligence, upon signing appropriate confidentiality agreement. The same opportunity was provided also to PPF and Sanofi-Aventis, but neither of them used this opportunity. In particular, PPF cancelled at very short notice a previously scheduled meeting the purpose of which was to discuss the provision of further information. Also, we did not find it particularly helpful for the process and maximization of shareholder value that PPF withdrew its offer and made some confusing statements in this connection.
The extensive discussions did not result in an alternative that would be more beneficial to the Company, Zentiva shareholders and other stakeholders, than the Improved Sanofi Offer.'
Question: If the Board can confirm that it has taken such steps, can the Board please disclose which investment banking firm or other financial adviser the Board used to identify and approach such potential alternative bidders?
Mr. Petr Šulc answered the question:
'As already disclosed, Merrill Lynch International acted as financial advisors to the Board and they received a mandate from the Board to approach well known reputable strategic and financial buyers. Merrill Lynch was selected because of their familiarity with the Company and its operations and their extensive knowledge of, contacts within and transactional experience in relation to the pharmaceutical industry.
The independent non-executive directors of the Board also separately received financial advice from Rothschild.'
Question: Can you please explain in detail how many such potential alternative bidders were identified and how many of them were approached, and also how exactly those potential alternative bidders were approached?
Mr. Petr Šulc answered the question:
'Almost 40 parties were contacted, ranging from global pharma companies, generics companies, financial sponsors and other potentially interested parties.
Mostly, very senior management of the identified parties was approached by Merrill Lynch International, using their extensive contacts within financial and pharmaceutical industry.'
Question: What commercial and financial information was given to such potential alternative bidders?
Mr. Petr Šulc answered the question:
'All of these parties were provided with a so-called teaser based on publicly available information and were offered an opportunity to conduct due diligence upon signing of an appropriate confidentiality agreement.'
Question: Did they get the same information that was made available to Sanofi-Aventis?
Mr. Petr Šulc answered the question:
'Sanofi-Aventis declined the opportunity to conduct due diligence so was not provided with any non-public information.'
Question: Did they get the same information as was made available to the Sanofi-Aventis representatives on the Board?
Mr. Brad Wilson answered the question:
'Clearly not. Company sensitive commercial information was not shared with any outside party.
All Board members of Zentiva owe a legally recognised duty of loyalty to Zentiva and if they obtain information in their capacity as Zentiva Board members, they are prohibited from sharing this information with any third parties, including their main employer, or from using that information for any other purpose than in connection with their Board membership.
Any information provided in the past to the Board members affiliated with Sanofi-Aventis was provided to them in their capacity as Zentiva Board members. This is not information that would be provided to Sanofi-Aventis itself.
Similarly, if a person affiliated with PPF would be a member of Zentiva Board, his or her obligation and duty towards the Company would be not to share information with anyone else in PPF.
In any case, to avoid even appearance of any conflict of interest, the Board proceeded in an extremely diligent manner which we described earlier during our presentation. In respect of the PPF offer and the Sanofi-Aventis offer, the Board members affiliated with Sanofi-Aventis did not receive relevant documents, did not participate in the Board's discussion, and did not participate in the Board's decision-making.'
Question: Please explain in detail on the basis of what information the Board came to the conclusion that the price offered by Sanofi in its improved bid was a fair price that the Board can recommend?
Mr. Brad Wilson answered the question:
'Apart from considering a broad range of transactional alternatives, as described earlier, the Board made a financial assessment of the Improved Sanofi Offer. It based its assessment on a discounted cash flow analysis, transaction multiples paid analysis, and peer group analysis based on the financial performance of Zentiva. The Board has also reviewed bid premia in recent public offers for comparable generics companies. The Board also considered the then existing market turbulences, which has later turned into the ongoing financial crisis. Further, the Board has received an opinion from Merrill Lynch International on the fairness of the price from a financial point of view.'
Question: Anthiarose understands that there is a Merrill Lynch report as to the value of Zentiva and the Zentiva shares. Can you please provide the shareholders with a full copy of the report/fairness opinion of Merrill Lynch (or a full description of the content thereof) in order for the shareholders of Zentiva to be able to more accurately evaluate the conclusions drawn from the Merrill Lynch report.
Mr. Brad Wilson answered the question:
'Merrill Lynch fairness opinion is available in full on Zentiva website since October 1, 2008, when the officially made Improved Sanofi Offer was officially recommended by the Board.'
Question: Has there been any other valuation of Zentiva or the Zentiva shares conducted (other than the report of Merrill Lynch)?
Mr. Brad Wilson answered the question:
'The Board also received a fairness opinion from Rothschild, an internationally recognized investment bank engaged to advise the independent directors, on the fairness of the price from a financial point of view.'
Question: If not, why do you think it was sufficient to have only the Merrill Lynch valuation?
Mr. Brad Wilson answered the question:
'The Board believes that a fairness opinion from Merrill Lynch is entirely sufficient, given long-standing market practice. However, the Board also received another fairness opinion from Rothschild.'
Question: Has Sanofi-Aventis (through its representatives on the Board or otherwise) had any access to the full Merrill Lynch report or any other valuation of Zentiva or to any data from which any such valuation can be made?
Mr. Brad Wilson answered the question:
'Sanofi-Aventis have received no documents that have not been made available to all shareholders.
Sanofi-Aventis did not have any access to any materials underlying the Merrill Lynch fairness opinion and/or provided to Merrill Lynch for the purposes of preparing their fairness opinion.'
Question: Did Merrill Lynch produce for Zentiva or Zentiva's management any other valuations for any purposes other than for the assessment of the bids made for Zentiva?
Mr. Petr Šulc answered the question:
'Not in connection with this process. In the past, Merrill Lynch acted for Zentiva on a number of transactions, for instance with respect to the acquisition of Sicomed in 2005 or in connection with Zentiva's IPO in 2004.'
Question: If yes, can you please provide copies of these reports to the shareholders?
Mr. Petr Šulc answered the question:
'These reports have no connection whatsoever to the Improved Sanofi Offer, and to the extent these reports were not disclosed in the past, we see no reason to disclose them now. Most of these reports are outdated and subject to non-disclosure obligations anyway.'
Question: Can you please provide the shareholders with a copy or full description of the contents of any and all agreements and arrangements entered into between Zentiva (or any company of the Zentiva group) and Sanofi-Aventis (or any company of the Sanofi-Aventis group), particularly the agreement announced on 22 September 2008 and all of the relevant information related thereto?
Mr. Brad Wilson answered the question:
'As already discussed, Zentiva has disclosed all material information regarding the Merger Protocol, fully in compliance with applicable laws and international market practice.
As explained, the parties of the Merger Protocol are bound by a confidentiality obligation towards each other to protect their legitimate interests. Disclosure of the Merger Protocol in its entirety would be a breach of that obligation.
Besides the Merger Protocol, the only other agreement entered into in between Zentiva and Sanofi-Aventis Europe in respect of the Improved Sanofi Offer is a confidentiality agreement, which is not material.
Certain members of Zentiva's management have entered into customary irrevocable undertakings obliging them to tender their shares into the offer. The existence of these agreements was disclosed on 22 September 2008.
There are no other agreements or arrangements between Zentiva or any member of Zentiva group and Sanofi-Aventis or any member of Sanofi-Aventis group in relation to the Improved Sanofi Offer.
Because Sanofi-Aventis is also a pharmaceutical company, there are a number of non-material commercial agreements at arms length terms in place, which relate to our day-to-day business activities. Zentiva's practice is to have any such agreement to be approved by non-executive independent directors. Many of these agreements contain commercial secrets and they are subject to confidentiality obligation. By disclosing these agreements, Zentiva would be in breach of the confidentiality obligations. None of these agreements have any relevance to the Improved Offer. Therefore, we do not intend to disclose any of these agreements.'
Question: Can you please provide the shareholders with a copy of or a full description of the contents of any and all agreements or arrangements entered into between Zentiva's managers and/or Directors and Sanofi-Aventis (or any other company of the Sanofi-Aventis group)?
Mr. Brad Wilson answered the question:
'Zentiva cannot provide and/or discuss any agreement which it is not a party to.
However, we have confirmed with the members of the management who signed the irrevocable undertakings that apart from such irrevocable undertakings and apart from Mr. Jiří Michal being a party to the Merger Protocol, there are no other agreements or arrangements between them and any company from Sanofi-Aventis group.'
Question: Who personally negotiated the agreement between Zentiva and Sanofi on the part of Zentiva and who acted on behalf of Sanofi?
Mr. Brad Wilson answered the question:
'In accordance with their duties, authority and obligations the entire Board (of course without the Board members affiliated with Sanofi-Aventis) participated in the discussions and deliberations. In particular, together with their advisors, Mr. Jiří Michal, in his capacity as the Chief Executive Officer, and Mr. Brad Wilson, in his capacity as an independent non-executive director attended final discussions, and discussed the various issues separately with the rest of the Board.'
Question: Who signed the agreements with Sanofi-Aventis on the authority of Zentiva?
Mr. Brad Wilson answered the question:
'The Merger Protocol was signed on behalf of Zentiva by Mr. Jiří Michal, as Director A, and Mr. Petr Šulc, as General Proxy Holder, following unanimous approval of the Merger Protocol by the Board (excluding Board members affiliated with Sanofi-Aventis) and unanimous authorization to sign the Merger Protocol.'
Question: Who proposed the EUR 25mil break fee and who proposed the non-solicitation clause?
Mr. Brad Wilson answered the question:
'Both clauses were proposed by Sanofi-Aventis Europe as is customary in such a process, as these are clauses commonly sought by prospective purchasers.'
Question: Did any or all of the members of the Zentiva management receive any indemnities from Sanofi-Aventis for any claim raised or damage incurred in connection with the agreement entered into between Sanofi-Aventis and Zentiva (or any member(s) of the Zentiva management) and their recommendation of Sanofi-Aventis' improved offer?
Mr. Brad Wilson answered the question:
'No such indemnities were provided to any member of Zentiva management.'
Question: Was any consideration or incentive given or promised to any member of Zentiva's management in connection with the agreement entered into between Sanofi-Aventis and Zentiva (or any members of the Zentiva management) or in connection with the recommendation of the improved offer of Sanofi-Aventis?
Mr. Brad Wilson answered the question:
'As disclosed, Sanofi-Aventis agreed that Mr. Jiří Michal will remain as the CEO and executive director of the Company for two years. Apart from this, no incentive was ever discussed or agreed. As to Mr. Michal, his continued service was in fact considered to be an incentive to Sanofi-Aventis who included this in its wish-list for the terms of a recommended offer.'
Question: You have repeatedly declared in your communications with Anthiarose that in relation to the Sanofi-Aventis bid you acted in the best interest of all of the shareholders and other stakeholders in Zentiva. In this context, how do you perceive the intention of Sanofi-Aventis to, after the closing of the bid, de-list the shares of Zentiva and, if possible, to squeeze the other remaining shareholders out of Zentiva?
Mr. Brad Wilson answered the question:
'We are aware of the intention of Sanofi-Aventis to seek de-listing and/or squeeze-out as soon as possible. As repeated several times today, we believe that it is in the best interest of Zentiva shareholders to accept the Improved Sanofi Offer. A shareholder who accepts the Improved Sanofi Offer will not be affected by the de-listing and/or squeeze-out. Proceeding with de-listing and/or squeeze-out after a successful takeover is a standard market practice.
It will not be possible for Sanofi-Aventis to commence squeeze out proceedings unless it holds at least 95% of the shares in Zentiva. Sanofi-Aventis has agreed that as long as it will hold less than 95% of the shares, two independent non-executive directors will be board members and will have the specific mandate to protect the interests of minority shareholders.'
Question: Why, according to the information announced in the press release of 22 September 2008, has Zentiva agreed with Sanofi-Aventis not to seek potentially more advantageous bids (the non-solicitation clause)?
Mr. Brad Wilson answered the question:
'Non-solicitation clauses are standard market practice in similar transactions.
The non-solicitation clause was an important element of the Merger Protocol for Sanofi-Aventis Europe. Without agreement on a non-solicitation clause, Sanofi-Aventis Europe was not willing to agree to the Merger Protocol and, consequently, Zentiva shareholders would not benefit from the Improved Offer. The Merger Protocol provides for a possibility for the Board to negotiate a recommended higher competing offer if such an offeror would be willing to offer an attractive price, and the non-solicitation clause does not in any way limit a third party in making an offer.
Also, prior to entering discussions with Sanofi-Aventis Europe, the Board has already broadly explored various transactional alternatives and, through Merrill Lynch, contacted almost 40 parties including PPF, ranging from global pharma companies, generics companies, financial sponsors and other potentially interested parties. We were therefore satisfied that we had no other parties whom we wished to contact to solicit another offer.'
Question: What was the consideration that Zentiva received for such obligation, especially considering the break fee of EUR 25 million?
Mr. Brad Wilson answered the question:
'The consideration received by Zentiva for all its commitments in the Merger Protocol was, first, improvement of the Sanofi offer by CZK 100 per share, and, second, commitments provided to Zentiva by Sanofi-Aventis with respect to treatment of Zentiva employees, Zentiva's future strategy, and protection of minority shareholders. None of these would have been sure if Sanofi-Aventis would have successfully closed its offer without the Merger Protocol being signed.'
Question: Why do you consider this approach to be in line with the requirements of due managerial care and/or the equal treatment of all of the shareholders?
Mr. Brad Wilson answered the question:
'We believe that it would be a breach of the requirement of due managerial care if the Board refused to accept a reasonable non-solicitation clause and/or a reasonable break fee and, as a result, Sanofi-Aventis Europe would not improve its offer by CZK 100 and would not provide its commitments with respect to treatment of Zentiva employees and Zentiva's future strategy. The Merger Protocol provides for a possibility for the Board to negotiate a recommended higher competing offer if such an offeror would be willing to offer an attractive price.
The equal treatment of shareholders means that shareholders in similar position should be treated equally. Sanofi-Aventis Europe was ready to make a takeover offer of CZK 1,150 per share. There was no other shareholder who would be able and willing to make a similar offer. Therefore, no other shareholder was in the same position as Sanofi-Aventis Europe, and the requirement of equal treatment of shareholders could not have been breached.'
Question: Can you confirm that Mr. Michal, Mr. Sulc and some other management shareholders have agreed to the irrevocable and unconditional undertaking of tendering their shares in Zentiva (3.4%) in the improved Sanofi-Aventis offer and that Mr. Michal agreed with Sanofi-Aventis to remain the CEO of Zentiva after the successful closing of the Sanofi-Aventis offer?
Mr. Brad Wilson answered the question:
'It has been agreed as part of the Merger Protocol (as was already disclosed) that certain management shareholders shall irrevocably tender their shares into the Sanofi-Aventis offer.
It is customary for a bidder to request existing management to remain with the company in any event for a transitional period. In this case, Jiri Michal has agreed to remain available as CEO for a period of two years after Sanofi-Aventis specific request.'
Question: Did Mr. Michal, Mr. Sulc and the respective other management shareholders take part in the decision making process which concluded by issuing the recommendation of the improved bid and signing of the agreement with Sanofi-Aventis?
Mr. Brad Wilson answered the question:
'Yes, Mr. Jiří Michal participated in the Board decision on recommendation of the Improved Sanofi Offer.'
Question: What measures have been taken to avoid conflicts of interest on the side of Mr. Michal and possibly also the other shareholders who have management functions (having, on one side, a personal interest in the success of the Sanofi-Aventis offer and, on the other side, a responsibility to decide on any recommendation of the offer and the execution of the agreements with Sanofi)?
Mr. Brad Wilson answered the question:
'We do not see any conflict of interest at all in a member of the management being also a shareholder of the Company. In our view, and in accordance with mainstream corporate finance literature, management shareholding helps to align interests of managers and shareholders and incentivizes management to accept the highest available offer.
Any decisions with respect to the improved Sanofi-Aventis offer were made by the Board unanimously and the Board has carefully ensured that at all times in the negotiations appropriate checks and balances where in place, for instance by intense involvement of the independent non-executive directors throughout the whole process.'
Question: Can Mr. Michal inform the shareholders whether he considers himself to be acting in concert with Sanofi?
Mr. Brad Wilson answered the question:
'Unfortunately, Mr. Michal is not present here today. However, he specifically authorized us to confirm on his behalf that he does not consider himself to be acting in concert with Sanofi-Aventis.
We completely fail to understand on what basis you are asking this question and what purpose you intend to achieve by this.'
Question: Can you please explain in detail the 'special' relations in the past between Sanofi-Aventis and those members of the Zentiva management who are also shareholders?
Mr. Brad Wilson answered the question:
'To the extent known to Zentiva, on March 24, 2006, a shareholders agreement was executed between Sanofi-Aventis Europe on the one side and certain management shareholders on the other side. This agreement provided for certain restrictions on transferability of Zentiva shares owned by the management shareholders. Specifically, until March 24, 2008, the management shareholders were prohibited from selling, transferring, pledging, or otherwise disposing or encumbering their shares in Zentiva. Following March 24, 2008, Sanofi-Aventis Europe had a right of first refusal on any shares the management shareholders may have wished to sell or otherwise transfer. Also, the Management Shareholders were granted a tag-along right in case Sanofi-Aventis Europe intended to sell its shares in Zentiva. The shareholders agreement was concluded for an indefinite period of time, and could only be terminated for reasons stipulated in the agreement. All of this was disclosed in Zentiva's 2007 Annual Report.
As far as the company is aware, the shareholders agreement contained only very limited voting arrangements, which did not constitute control of Zentiva.
The company was informed on June 25, 2008 that the shareholders agreement was terminated in full as of that date.'
Question: Can you describe these relations?
Mr. Brad Wilson answered the question:
'Apart from what was mandatorily reported in Zentiva's 2007 Annual Report, we are not able to describe the shareholders agreement because Zentiva was not a party to it. In any case, it should not matter anyway, because the agreement was terminated in full in June 2008.'
Question: Can you please provide the shareholders with a full copy of the 'shareholders' agreement of 24 March 2006 as executed between Sanofi-Aventis and the discussed members of the Zentiva management who are also shareholders or, if it is not in writing, with a full description thereof?
Mr. Brad Wilson answered the question:
'Zentiva was not a party to this agreement and is not able to provide its copy and/or its description beyond what was stated before. We repeat that the agreement was terminated in full in June 2008, so we do not see its further relevance.'
With respect to questions from a representative of the third shareholder:
The representative firstly inquired whether the contact with the almost 40 parties took place before the Merger Protocol and the non-solicitation clause were agreed to by the Company. The representative addressed its second question to PPF and stated that, assuming the answer to his previous question is positive, he fails to understand the purpose of PPF's questions and of the lawsuit recently filed by PPF against the Company, because it appears that the Board has run due process. He further stated that the shareholder he represents would be happy to sell its shares to PPF if PPF made a higher bid than Sanofi-Aventis, which however is not the case.
Mr. Brad Wilson confirmed that the Company started discussions with Sanofi-Aventis and entered into the Merger Protocol, including the non-solicitation clause, only after almost 40 parties were contacted and other transactional alternatives were explored and considered. With respect to the question aimed at PPF, Mr. Brad Wilson thanked the investor for their support and invited the present representatives of PPF to answer the question. The present representatives of PPF declined to answer the shareholder's question stating that they did not wish to engage in discussion among shareholders as there were no voting items on the agenda of the EGM.
Following this, Mr. Brad Wilson invited shareholders to ask any further questions.
The above referred first shareholder expressed his belief that a squeeze-out is an unconstitutional measure which violates the right to property, one of the elementary human rights. He further stated that this approach may be adopted by the courts in the future and that squeeze-outs may be invalidated even retroactively. Therefore, he warned, any squeeze-out may result in potential difficulties in the future. The shareholder added that this was merely a comment, not a question.
There were not other questions from any of the shareholders present at the EGM.
Agenda Item 4 - Discussion of potential competing offers, if any, with respect to which the Board's position will be published prior to the extraordinary general meeting
The Chairman of the EGM stated that as of the EGM, there were no outstanding competing offers with respect to which the Board's position would be published prior to the EGM. As explained in the convening notice for the EGM, under these circumstances this agenda item was moot.
Mr. Brad Wilson then closed the EGM.
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Investor Relations
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Media Relations
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Petr Šulc
Chief Financial Officer
Tel: +420 267 242 737
petr.sulc@zentiva.cz
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Alexander Marček
Corporate Finance Director
Tel: +420 267 243 745
alexander.marcek@zentiva.cz
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Věra Kudynová
PR Manager
Tel: +420 267 242 312
vera.kudynova@zentiva.cz
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Liběna Stiebitzová
Investor Relations Specialist
Tel: +420 267 243 055
libena.stiebitzova@zentiva.cz
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General Inquiries
Tel: +420 267 243 888
Fax: +420 272 702 869
investor.relations@zentiva.cz
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Citigate Dewe Rogerson
Tel: +44 (0)20 7638 9571
David Dible
david.dible@citigatedr.co.uk
Chris Gardner
chris.gardner@citigatedr.co.uk
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IMPORTANT NOTICES
Forward-looking Statements
This document contains 'forward-looking statements'. These forward-looking statements include all statements that are not historically known facts. They appear in a number of places throughout this document and include, but are not limited to, statements and underlying assumptions regarding Zentiva's intentions, beliefs, projections, plans, objectives, estimates, and current expectations concerning, amongst other things, Zentiva's results of operations, financial condition, liquidity, performance, prospects, growth, strategies, and the countries and industries in which Zentiva operates. Forward-looking statements are generally identified by the words 'expects,' 'anticipates,' 'believes,' 'intends,' 'estimates,' 'plans' and similar expressions. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, many of which are difficult to predict and generally beyond the control of Zentiva. Forward-looking statements are not guarantees of future performance, and the actual results of Zentiva's operations, financial condition, liquidity, performance, prospects, growth, strategies, and the development of the countries and the industries in which Zentiva operates may differ materially from those described in, or suggested by, the forward-looking statements contained in this document. Other than as required by applicable law, Zentiva does not undertake any obligation to update or revise any forward-looking information or statements.
Other Important Notices
This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares or global depositary shares in Zentiva, nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract or investment decision.
Recipients of this document, or any part or any copy of it, may not, directly or indirectly, take, or transmit into, or further distribute the document in, the United States, Canada, Australia, or Japan, or to any resident thereof. The distribution of this document in other jurisdictions may also be restricted by law, and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of US, Canadian, Japanese, Australian or other securities laws.
Zentiva's ordinary shares and global depositary shares have not been and will not be registered under the US Securities Act of 1933 (the 'Securities Act') and may not be offered or sold in the US except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.
For the purpose of Section 21 of the Financial Services and Markets Act 2000 of the United Kingdom (the 'FSMA'), any potential invitation or inducement to engage in any investment activity included within this document (which Zentiva believes there is none) is directed only at (i) persons who are investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) of the United Kingdom (the 'Financial Promotion Order'); (ii) persons who fall within Articles 49(2)(a) to (d) ('high net worth companies, unincorporated associations etc.') of the Financial Promotion Order; and (iii) any other persons to whom this document for the purposes of Section 21 of FSMA can otherwise lawfully be made (all such persons together being referred to as 'relevant persons'), and must not be acted on or relied upon by persons other than relevant persons. Any potential invitation or inducement to engage in any investment activity included within this document (which Zentiva believes there is none) is available only to relevant persons and will be engaged in only with relevant persons.
This document is published in both English and Czech version, however, only its English version should be considered the official one. Its Czech version is published solely for information purposes, and no representation is made and no warranty is given as to the accuracy of the Czech translation. Should there be any difference between the English and Czech version of this document, the English version shall always prevail.
NOTE FOR EDITORS
Zentiva N.V. is an international pharmaceutical company focused on developing, manufacturing and marketing modern generic pharmaceutical products. The Company has leading positions in the pharmaceutical markets in the Czech Republic, Slovakia, Romania, and Turkey and is growing rapidly in Poland, Russia, Bulgaria, Hungary, the Ukraine and the Baltic States. Zentiva's strategy is to further this growth by increasing patient access to modern medicines through primary care providers within the EU and Eastern Europe. This growth will be based on further organic development of Zentiva's existing business and through selective acquisitions, whilst maintaining profitable growth.
The Company addresses a wide range of therapeutic areas but has a particular focus on cardiovascular disorders, inflammatory conditions, pain, infections and diseases of the central nervous system and the gastrointestinal and urology fields.
The Zentiva Group employs almost 6,000 people and has production sites in the Czech Republic, Slovakia, Romania, and Turkey.
Zentiva is listed on the Prague and London Stock Exchanges. Based on official notifications by shareholders to the Dutch regulator, the Company's largest shareholders are Sanofi-Aventis (24.9%), PPF Group and Generali PPF Holding B.V. acting in concert (24.3%), Belviport Trading Ltd. (10.1%) and Fervent Holdings Limited (7.6%). Zentiva's management holds 5.9% of the Company shares. Other institutional and private investors hold a combined 27.2% of Company shares.
This information is provided by RNS
The company news service from the London Stock Exchange
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