The proposal was made by Origin Technologies Corporation but the Affymetrix board recommends stockholders back the merger agreement with Thermo Fisher.
Thermo Fisher announced in January it was to buy Affymetrix for $1.3bn and integrate the business into its Life Sciences Solutions Segment.
With the Origin offer, stockholders of Affymetrix would receive $16.10 per share in cash. A meeting of the firm’s stockholders will take place on March 24.
Origin Technologies Corporation LLC is owned by a group of former Affymetrix executives and was formed for the specific purpose of acquiring Affymetrix.
Affymetrix said its Board of Directors notes the bidder appears to be a newly-formed shell entity with no assets of which it is aware, and whose sole source of funding is $1.5bn in potential debt commitments.
Preliminary discussions last year
Based on analysis by Affymetrix' advisers, $1.5bn falls short of the funds required to complete the transaction, including the amounts required to be paid in existing shares, employee equity arrangements, existing convertible notes and credit facility, and anticipated expenses, including a termination fee to Thermo Fisher Scientific.
"We held preliminary discussions in the fall of 2015 with individuals who became principals and potential backers of Origin, and in November 2015 I invited them to submit a written proposal if they had serious interest in a strategic transaction with Affymetrix,” said Dr Frank Witney, CEO and president of Affymetrix.
“We heard nothing further from them for over four months until they announced their unsolicited proposal on March 18.”
Origin said it has secured debt financing from SummitView Capital, a private equity firm.
The firm added its bid would offer greater long-term growth opportunities for employees as a standalone, global company focused on genomics and proteomics and the opportunity to acquire new technologies to enable sequencing the complete human genome to benefit researchers and patients worldwide.
“Our offer presents a compelling opportunity for Affymetrix’ stockholders to realize superior value through an attractive premium, along with a transaction structure and customary closing conditions similar to the offer from Thermo,” said Dr Wei Zhou, president of Origin.
Origin could, after any potential deal was completed, combine with Centrillion Technology Holdings Corp. a Palo Alto-based genomic technologies company founded by Dr Zhou in 2009.
Thermo Fisher said it agreed with Affymetrix and its board of directors that the Origin Proposal does not constitute, and could not reasonably be expected to lead to, a “Superior Proposal”.
“The proposal put forth to Affymetrix by Origin Technologies, a newly created shell entity relying on a vague and insufficient financing package from a Chinese firm, is highly uncertain and speculative and does not constitute, and could not reasonably be expected to lead to, a superior proposal under the merger agreement, and Affymetrix and its board of directors could not reasonably determine otherwise,” said Marc Casper, president and CEO of Thermo Fisher.
“Among other reasons, the Origin Proposal was unaccompanied by any proposed merger agreement, is subject to numerous contingencies, including the completion of due diligence and receipt of external financing from Chinese investors and banks, and has the strong potential for a prolonged – and likely unsuccessful – regulatory review, particularly as it relates to the CFIUS (Committee on Foreign Investments in the US).”
Thermo Fisher said Origin Technologies has ‘blatantly flouted’ and violated the US securities laws by failing to make required proxy solicitation filings with the Securities and Exchange Commission (SEC).
Open letter to stockholders
Casper said its merger agreement with Affymetrix has been unanimously approved by both boards of directors, has fully committed financing and has received regulatory approvals.
Thermo Fisher issued an open letter to Affymetrix stockholders saying the Origin Proposal ‘had a number of fatal inadequacies and shortcomings’.
“In fact, there is little to no credibility in the marketplace around either the proposed buyer or its financing sources,” wrote Casper.
“In addition, there is significant potential for a lengthy and ultimately unsuccessful regulatory review should Affymetrix enter into an agreement with Origin Technologies, an entity purportedly backed by vague Chinese financing sources.
“Furthermore, the timing of the proposal itself – which came late on Friday just days before your stockholder meeting and one week before planned close, further undermines the credibility and legitimacy of Origin Technologies and its proposal, and reinforces the conclusion that it cannot be considered bona fide.
“Finally, this non-binding proposal is subject to a due diligence condition, which means Origin Technologies could walk away from a potential transaction for any or no reason following completion of an indeterminate due diligence review.”