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Chelsea Therapeutics - Going Private Transaction Provides Significant Upside

Investment thesis

Investment in Chelsea Therapeutics (NASDAQ:CHTP) presents a very asymmetric risk/return opportunity. On 7th of May, the company announced a merger agreement and going private transaction with Lundbeck (OTCPK:HLUYY). CHTP investors will be receiving $6.44/share in cash (vs. current price of $6.54/share) plus contingent value rights that could result in payments of $1.5/share during the next three years. So the investment thesis boils down to paying $0.1 for a possibility to receive $1.5/share in the future. Thus, this transaction not only provides material potential upside for existing Chelsea Therapeutics' shareholders, but also gives a floor/downside protection just below the current share price.

Details of the merger agreement

Chelsea Therapeutics is a pharmaceutical company that recently...

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