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Sydney - Monday - March 9: (RWE Aust Business News) - Progen
Pharmaceuticals (ASX:PGL) have, by agreement with Avexa (ASX:AVX),
terminated the agreement for the proposed merger with Avexa.
It had become apparent that the merger would not be approved by
the required percentage of Progen shareholders.
As the mutual decision to terminate the merger agreement was
precipitated by the decisive Progen shareholder vote against it, Progen
will pay a break fee of $500,000 to Avexa.
While Progen believes the merger had the potential to deliver a
strong return on investment, Progen and Avexa recognised that the merger
vote was going to be unsuccessful.
Progen said this was due to a voting block of Progen shareholders
which developed over the time leading up to, and after, the announcement
of the merger, and who seemed to be interested in a larger return of
capital than the $20m (30pc of shares) proposed in the Avexa merger
transaction.
Progen is satisfying these shareholders needs through a $40
million voluntary share buy back at a price of $1.10 per share
representing 60pc of the Progen share register.
After carefully analysing all the various options for returning
capital, the Progen board believed that there was no viable alternative
capital return strategy that can deliver $1.10/share within the next thre
months for those shareholders that would like to exit the company by such
a mechanism.
The remaining cash will be for the further development of key
Progen technologies including a development and commercialisation plan
for PI-88 to be registered in Taiwan.
Progen has been advancing discussions for the regional
development of PI-88 in Asia.
"The merger between Progen and Avexa certainly had the
potential to give shareholders a strong return on investment in excess of
$2.03 to $3.18 per share based on a discounted cash flow valuation of ATC
alone," chief executive Justus Homburg said.
"Unfortunately, we have a voting block of shareholders that are
not interested in holding biotechnology shares and instead would
like to see their investment realized via a cash return as soon as
possible.
"We believe a $40m buyback (60pc of shares) at $1.10 is the
maximum buyback reasonably possible if the company is to remain a
worthwhile going concern.
"We also recognise that there is another voting block of Progen
shareholders that would like to see the Progen heparin sulfate
technology portfolio progressed and for this reason we have retained
sufficient capital for this purpose."

Assuming the $40m share buyback is approved by Progen
shareholders at a general meeting to be scheduled for 21st April 2009,
shareholders will have the following options:
Maintain their shareholding in Progen under its new strategy
focussed around the regional commercialisation of PI-88 as well as its
other earlier stage oncology assets or;
Sell their shares into the buy back at a price of $1.10 per share
or;
Sell part of their shares into the buy back and maintain part of
their shareholding in Progen.

Further developments
The general meeting on 11th March has been cancelled.
Cytopia (ASX:CYT) had commenced proceedings in the Federal Court
to adjourn the 11th March meeting to a later date.
Progen will be advising the Court that the meeting has been
cancelled.
The meeting which has been requistioned by the Cytopia
shareholder group and which has been scheduled for 27th March will
proceed.
That meeting's agenda includes resolutions to remove all current
directors and appoint three new directors.
The Progen board reiterates its recommendation that shareholders
vote against all resolutions on 27th March.
A tender invitation dated 2nd March 2009 for the $20 million buy
back that was part of the Avexa transaction was recently sent to
shareholders.
That buy back is cancelled and the tender invitation is
withdrawn.