Shareholder Boar
Biotech, special situations, event-driven, deep value

Chelsea Therapeutics Deal Terms: Be Careful

On May 7, 2014, Chelsea Therapeutics (NASDAQ:CHTP) agree to be acquired by the Danish corporation H. Lundbeck A/S (OTCPK:HLUYY). The acquisition is structured as a tender offer followed by a second step merger. The tender offer has already started and is scheduled to close June 20, 2014.

Tendering shareholders are to receive $6.44 in cash plus one Contingent Value Right (NYSEMKT:CVR) per share. Shareholders who do not tender will receive the same consideration after the merger is completed.

A source of some confusion is the structure of the CVR. Issuance of CVRs in pharmaceutical buyouts has become common place in recent years. These rights are commonly tied to the performance of key assets of...

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