Impax Labs Misleading Registration Statement Securities Class Action

On October 17, 2017, Impax Laboratories, Inc. entered into a complex merger agreement with Amneal Pharmaceuticals, but the complaint for this class action says that the Registration Statement for the transaction is deficient and violates Sections 14(a) and 20(a) of the Securities Exchange Act of 1934.

The class for this action is the public stockholders of Impax Laboratories, Inc.

Impax develops drugs and drug delivery technology, with the company operating in two segments, Impax Generics and Impax Specialty Pharma. Impax Generics, as the name says, makes generic drugs, while Impax Specialty Pharma concentrates on such things as drugs for central nervous system disorders.

In the proposed transaction, Impax will merge into an entity called “Holdco” and become a limited liability company; Holdco will give all Impax’s equity interests to Amneal in exchange for some of Amneal’s equity interests; Holdco will become a holding company, to be named after Amneal, called New Amneal in this description; New Amneal will issue Class B shares of common stock to existing Amneal shareholders; and New Amneal will manage Amneal.

Existing Impax stockholders will receive one share of Class A common stock for each share of Impax that they currently hold, which will give them collectively about 25% of the voting and economic interests under New Amneal. Existing Amneal shareholders will have 75%, until after the transaction is completed. Then, institutional investors, referred to as “the PIPE investors,” will buy shares and hold about 15% of the voting power, with existing Amneal stockholders retaining 60%.

Is this a good deal for Impax stockholders? According to the complaint, it’s impossible to say, because the Registration Statement omits too much information.

First, the complaint claims it omits information about the financial projections for Impax, Amneal, and New Amneal and the valuation analyses performed by the company’s financial advisor. Among other things, it uses non-GAAP measures but does not reconcile them with comparable GAAP measures.

Second, the complaint alleges that information is missing about financial advice it received from Bank of America Merrill Lynch (mentioned in a joint press release about the transaction but not in the Registration Statement), as well as any conflicts of interest that might arise from its involvement.

Third, the complaint claims that the Registration Statement omits information about the background of the transaction, including the terms of agreements with other parties and the “several business development opportunities for Impax that merited further exploration” which were mentioned in the Registration Statement but not further detailed.

Also, a board meeting raised a question about possibly having an auction for the company. This option was not pursued, and the complaint claims that stockholders need to know why, particular since the Registration Statement lists as a risk and potential negative factor that “Impax negotiated exclusively with Amneal” rather than conducting an auction or following another more open sales process.

With these important omissions, the complaint claims, Impax stockholders do not have sufficient information to asses the fairness or value of the proposed transaction. 

Article Type: Lawsuit
Topic: Securities
Tags: Mergers or Acquisitions, Providing False or Misleading Information, Registration Statement, Securities