A lawsuit filed Friday by Duane Howell on behalf of HGS shareholders asks the Circuit Court for Montgomery County to issue a temporary restraining order preventing the board of directors from enacting the poison pill and any other tactics designed to block Glaxo’s acquisition offer.
The lawsuit asserts that the company’s board of directors did not uphold its financial responsibilities when it rejected a $2.6 billion proposal from Glaxo last month. Additionally, the filing claims that actions taken by the company’s board of directors have given it undue control over a propsective deal.
“These defensive measures are preclusive, and their collective effect serves to impermissibly disenfranchise HGS’s shareholders, stripping them of the opportunity to decide whether or not to accept the GSK Offer or any competing offer,” the court filing states.
The court filing also asks the judge to expedite the case because shareholders will be “irreparably harmed” if the poison pill is not rescinded before a tender offer issued earlier this month by GSK expires on June 7. That offer also values the company at $2.6 billion.
Representatives from HGS did not immediately respond to requests for comment. A spokesman for Glaxo declined to comment on the litigation.
HGS and Britain-based Glaxo are longtime business partners. They co-developed a systemic lupus treatment called Benlysta and have two other drugs still in the works. Benlysta is HGS’s only commercially viable drug to date and sales have been slower than many industry observers anticipated.
The acquisition saga started last month when Glaxo made an unsolicited bid for HGS worth $2.6 billion. At the time, the offer was an 81 percent premium over the company’s individual share price. The HGS board of directors rebuffed that offer saying it undervalued the company’s long-term financial prospects.
Glaxo countered earlier this month with a tender offer aimed at buying the firm’s outstanding stock directly from shareholders, and in doing so, wrest control of the company without the board’s approval.
That prompted HGS’s board to adopt a stockholder rights plan, also known as a poison pill, that would kick in if a third party acquires more than 15 percent of the company’s outstanding stock. The plan makes the shares less attractive to an outside buyer by giving existing shareholders special privileges.