Three months of negotiations have come to nothing. Global generic drug maker IVAX (AMEX; LSE:IVX) will not be acquiring Israeli drug maker Agis Industries (Pink Slips:AGIDF; TASE:AGIS). Only yesterday did IVAX even admit that negotiations were taking place, while Agis would only confirm that it was holding merger negotiations with a foreign company, whose name it declined to reveal. For its part, IVAX kept radio silence on the subject.
The silence was broken last night. In a press release, IVAX stated, "We did engage in negotiations with Agis, but these now have ended."
In its press release this morning, Agis stated that the negotiations "ended without entering into a binding agreement due to circumstances that are not related to the mutual valuation of the two companies." Agis added, "The company is evaluating various strategic options including the acquisition of corporations in its fields of activity and/or cooperation with entities that complement the company's activities in Israel and abroad."
So far as is known, the merger was to been carried at a company value of $1.1 billion for Agis, whose market cap was $900 million as of this morning. The parties reportedly disagreed over the method of payment: IVAX wanted to pay in shares only, whereas Agis wanted a combination of cash and shares.
The announcement of the cessation of the negotiations was a surprise, although there were indications of trouble last week. There were reports of progress in the talks during the past few weeks and that IVAX would make an official statement simultaneously with the publication of its financial report for the first quarter of 2004, which came and went without any statement about the negotiations.
Parties close to the negotiations told "Globes" that there was no significant delay, but that progress in the negotiations was slower than expected, which led to growing speculation about problems.
The dominant figure at Agis is, of course, president and chairman Moshe Arkin, who owns the 42.1% controlling interest in the company. Arkin personally led the merger negotiations, and as was his wont, refused to disclose any substantial details about the failure. He told "Globes", "The negotiations didn’t fail because of the deal's net economic aspects."
"Globes": So why wasn’t a deal struck?
Arkin: "I cannot comment on the specific reasons, because they're confidential to the parties. I cannot comment about the details, just as the other party cannot."
Who broke off the talks, Agis or IVAX?
"The best answer is that both parties are content with the decision, which was taken in view of the circumstances. Who told whom first is a matter for gossip. The main thing is that the decision was not due to disagreements over the valuations made by the two companies."
Don’t you think that the Agis shareholders are entitled to know why the deal failed?
"I don’t think that I should disclose that information. The negotiations were held behind the scenes and quietly, and there are things you cannot disclose without infringing on the other party's right to privacy. We have released a statement about what we think the other shareholders should know."
A few weeks ago, we heard that the negotiations were very close to conclusion. Was that true?
"Every time I was asked, I replied that I didn’t know the answer, because it's very hard to know in negotiations of this kind what is still outstanding and where disagreements will arise. I therefore emphasized that a deal was never close to being signed, and in fact the deal the deal did not go through."
Your statement said you were 'evaluating various strategic options'. Are you already in contact with other companies about a possible merger?
"We're evaluating various options, including acquisitions, and not necessarily deals like the IVAX one. The logic behind the negotiations was that Agis has to expand its business and products line, either by merger or by acquisitions. This strategic logic is still valid, but not necessary by a merger into another company, but in some other way."
Published by Globes [online] - www.globes.co.il - on May 6, 2004