Current Price: A$4.90
Target Price: A$6.4+
Upside: 30%+
Expected Timeline: TBD
This seems like a low-cost option to bet that the buyer will fail in its attempt to invoke a material adverse clause, and that the transaction will either close on the current terms or the parties will settle for a modest price reduction.
I covered Mayne Pharma (MYX:AX) as a Quick Pitch a few weeks ago (see here). The company makes women’s health and dermatology drugs. MYX had agreed to be acquired by U.S.-based Cosette Pharmaceuticals for A$7.40/share in cash. That deal is now in trouble. Cosette is trying to back out, citing a supposed material adverse change (MAC) on these three claims:
- Worsening financial performance based on MYX’s results for fiscal Q3 (ending March);
- Litigation with a major partner TherapeuticsMD;
- FDA’s letter about one of Mayne’s drugs.
As a result of this the stock has been hammered, and the spread now stands at 50%. Mayne Pharma insists that the takeover agreement (Scheme Implementation Deed, or SID) has not been breached, and, if necessary, plans to defend the original terms in court.
The wide spread suggests the market is highly skeptical that the merger will go through. I’m more optimistic. While I don’t have any special insight into MAC enforcement or Australian law—beyond what’s publicly available and some common sense—the upside would be substantial if the deal proceeds, with or without a price cut. And if I’m wrong, the potential downside appears limited enough to justify the risk. In other words, I see this as a low-cost option.
However, I want to be clear: this is still essentially an early-stage litigation situation, and it could potentially evolve into a prolonged legal battle. While there appears to be a reasonable chance that Mayne prevails in court, litigation outcomes are notoriously difficult to predict—and timelines can be lengthy. The encouraging part is that this is a MAC-focused dispute, and historically, MACs have proven extremely difficult to enforce successfully.
If a price-cut agreement is reached, I’d expect a much faster resolution. In one notable precedent—Metlifecare/EQT (2020)—the parties reached a settlement within three months of the MAC being invoked.
In my May 21 update (this comment), I walked through all three of Cosette’s MAC claims noting that:
“Hard to tell if Cosette has actually changed its mind or whether this is just a tactic to push for materially better transaction terms.
<…>
Visibility is limited, and there are still plenty of moving parts—but at this price, I’d dare to say that the setup might still be pretty interesting.
<…>
It’s far from clear how Cosette plans to build the MAC argument.“
The 10-day mandatory ‘Consultation Period’ between Cosette and MYX has now expired, and yesterday, Mayne received a formal termination notice from Cosette. While the fruitless conclusion of these early-stage talks does put a dent in my argument that Cosette might simply be pushing for better terms, several other developments over the past two weeks have, in my view, made the setup even more compelling. I outline those in the section below.
Importantly, Mayne’s management seems to be open to a negotiated resolution rather than pursuing the full original buyout price through prolonged litigation. The Supplementary Scheme Booklet released today included this paragraph:
Mayne Pharma Shareholders should be aware that it is open to Mayne Pharma and Cosette to, at any time, seek to find a path forward with the Scheme that does not involve pursuing litigation. Any agreement between the parties in relation to matters relevant to the Scheme, will be the subject of further disclosure by Mayne Pharma.
A modest price cut looks to the original offer looks like the most likely outcome.
Why the setup looks even more compelling now
#1: Involvement of Australian micro-cap activist Harvest Lane Asset Management
The fund hasn’t formally disclosed a stake in MYX, but this interview with the fund’s manager says it has “continued to build a position” following the recent selloff. Harvest Lane has been quite vocal about its bullish stance, calling the setup “a big opportunity”. The fund’s manager Luke Cummings has written a public article on MYX (see here), which noted:
Cosette has zero grounds to walk away from the transaction nor to request that the deal is repriced.
Cosette may very likely have buyer’s remorse. They may be worried about Trump’s tariffs and/or his pharma Executive Order. They may be worried about the outlook for the global economy and it’s entirely plausible that they are getting pressure from their private equity sponsors to negotiate a better deal or walk away altogether but none of that matters – it does not trigger a MAC (as defined in the SID) and Cosette will have a great deal of difficulty proving that it does.
A contract is a contract and should be honoured irrespective of whether the buyer is Australian, American, PE backed or otherwise. Cosette have a legally binding deal to acquire Mayne Pharma at $7.40 per share and Mayne Pharma has every right to enforce it.
#2: Harvest Lane crystallized a few additional bullish points
While some of the arguments made by the activist are similar to my earlier update on SSI, the article also highlighted several important additional points.
Most notably, the Scheme Booklet released on May 15 includes a key statement from Cosette: i.e. that the buyer was “not aware of any reason why the conditions to the debt financing would not be satisfied to enable the facilities to be drawn for the purpose of funding the Scheme Consideration” (page 65). Since that debt financing is explicitly conditional on the absence of MAC, Cosette effectively confirmed no MAC had occurred as of that date.
This is very significant, because as of May 15, Cosette already had full visibility into all three issues it’s now raising in it’s claims: Mayne’s financial results (Q1 update was released on April 22), the TXMD lawsuit (announced on April 11), the FDA letter (disclosed to Cosette in early May). And yet, Cosette notified Mayne of its intent to terminate the transaction based on those claims on May 17, just two days later. As Harvest Lane put it:
How exactly is it possible that in the opinion of Cosette there was no MAC breach as of Friday, but one had become apparent by Sunday?
The activist also drew a historical parallel to other failed MAC walkaways in Australia, such as Perpetual/Pendal (2022) and EQT/Metlifecare (2020). Both situations caused sharp selloffs—Pendal even traded at a 40% discount to the offer, similar to MYX now—but in the end, the buyers did not manage to terminate mergers. Each deal ultimately closed with a modest price cut—Metlifecare at -15% and Pendal at around -10% (though the headline price actually rose in Pendal’s case due to an increase in the buyer’s share price during that period).
#3: The financial performance claim looks weak
One of Cosette’s arguments for invoking a MAC appears to be MYX’s weak financial performance. On April 22, Mayne released its fiscal Q3 update, showing a notable year-over-year decline in both revenue and EBITDA (see the table below). It remains unclear how exactly Cosette intends to frame this as a valid MAC argument. In its May 21 press release—responding to Cosette’s first communication regarding potential termination—Mayne noted that Cosette “does not currently quantify the full financial impact” of its claims. Mayne’s communication issued yesterday did not elaborate on this either (so it is unclear if Cosette provided any additional quantification for Mayne or not).
For context, a MAC is considered triggered if MYX’s annual EBITDA declines by more than A$10.8m, albeit the baseline for EBITDA comparison has not been articulated in public disclosures.
I share the Harvest Lane’s view that Q3 weakness was likely temporary. MYX itself noted that January and February were soft, but things picked up in March, whereas April and May were back to normal.
Strong Q4 guidance (implying ~100% YoY EBITDA growth) reinforces the view that Q3 weakness was temporary. Full-year EBITDA guidance now stands at A$47m–A$51m. It’s unclear what baseline Cosette intends to use for its MAE calculation, but even if you compare it to the H1 run-rate EBITDA of A$57.2m, the projected shortfall wouldn’t meet the MAE threshold, which requires a drop of at least A$10.8m.
Finally, it’s difficult to believe that Cosette did not have a clue about the January-February slump during the due diligence. As Harvest Lane indicates:
Of note is that Cosette signed the scheme implementation deed (SID) with Mayne on 21 February. Are we really supposed to believe that Cosette weren’t aware of Mayne’s January and February trading performance up to and including that time?
#4: Fresh update on the FDA situation
Just yesterday, MYX received a close-out letter from the FDA, confirming that the previous issue has been fully resolved. This already looked like a flimsy MAC claim—the original FDA letter only required MYX to tone down some of its marketing materials for one drug. There was no product recall, no clinical hold, and no operational disruption. It’s unclear how Cosette planned to quantify any financial impact on this. Now that the entire matter was closed out in just a few weeks, it’s even harder to see how this could plausibly be used to break the merger.
#5: Recent update on TherapeuticsMD litigation
Mayne has fired back with a countersuit against TherapeuticsMD, seeking over US$11.5m in damages for breach of contract and fraud, citing concealment of information. Previously, Mayne had suggested the damages it might seek in its countersuit could be “in excess of the value of the claims made by TXMD.” Now that it’s put an explicit number on the table, the dispute looks rather immaterial in the context of the buyout.
Even before this update, this claim looked weak. The dispute with the partner wasn’t new, and should’ve been fully disclosed during Cosette’s due diligence for the buyout. The takeover agreement indicates that all legal costs related to operations that have been “Fairly Disclosed” won’t count towards reduction in EBITDA in the context of MAC.
Downside
The downside, in case the buyout falls apart completely, is difficult to pin down. However, based on the points below, it should be low/modest.
- The stock is already trading at pre-announcement levels, and according to management, the more recent performance slump has been resolved. So even if the deal somehow breaks, the sell-off shouldn’t be massive.
- The lowest point reached during the recent sell-offs following the buyout termination news was A$4.14/share, or ~15% below current levels. That might mark the floor.
- Based on the latest full-year guidance, MYX trades at 8x underlying EBITDA and 1x revenue (excluding earn-out liabilities), or ~15x EBITDA and ~1.9x sales if those milestone payments are included. The valuation looks fairly low compared to the available references discussed in my previous post:
– The closest peer OGN, which also focuses mainly on women’s health and dermatology, trades at 1.7x forward revenue and 5.5x EBITDA. However, OGN is extremely levered, with net leverage of 4.3x.
– MYX licensed 5 important women’s health products from TXMD in 2022 at ~2x revenue. These products now generate around 30% of MYX’s revenues.
– MYX sold its U.S. generics business in April 2023 at 0.9x revenue.
– Agile Therapeutics, a U.S. women’s health company with a single marketed contraceptive, was acquired in August 2024 at ~2x revenue.
Stuff I Couldn’t Fit Elsewhere
- For now, Mayne’s shareholder vote is proceeding as scheduled earlier, with the meeting set for June 18. MYX also intends to “continue to seek to work actively” with Cosette to obtain Australia’s foreign investment regulator approval shortly. This is normal is similar situations, but the transaction won’t close until the MAC dispute is resolved.
- Interestingly, yesterday’s termination notice announcement also included a vague reference to a “Cosette Additional Notice,” which alleges that MYX breached a representation and warranty—specifically, one contained in paragraph 15 of Schedule 2 of the Scheme Implementation Deed. This seems to be a new MAC claim on top of the three outlined above. I’m dropping the relevant part of the Scheme Implementation Deed below (page 84). This implies that something was off in the due diligence materials provided by Mayne—though it’s unclear whether this relates to the TXMD litigation or something else entirely. As MYX noted, it’s hard to understand why this supposed breach wasn’t raised in Cosette’s earlier notice on May 17, and is only surfacing now. So, at this point, it looks more like another posturing exercise.
I’ve run a deep research on a few AIs into historical MAC disputes in Australia, and it appears there are virtually no precedents where a buyer successfully invoked a MAC clause, went to court, and won. In most cases, disputes are resolved through a negotiated price cut. That said, there were a couple of borderline examples during the COVID-driven sell-off in 2020:
– Centuria Capital / Augusta Capital: Centuria invoked a MAC and terminated the deal, citing an “unquestionable deterioration of almost unrivaled magnitude in markets.” However, just a few months later, it came back with a lower offer, which Augusta accepte.
– Carlyle / Pioneer Capital: Carlyle also invoked a MAC. Pioneer publicly rejected the claim, and both sides signaled they were headed to court. However, I couldn’t find any clear follow-up on how that situation was ultimately resolved.
MAC clauses can differ significantly, and COVID was a clearly a one-off type of environment. So, overall, the historical precedents generally seems to favor MYX.
Re Carlyle/Pioneer: Pioneer owed Carlyle a large sum of money. Aside from invoking the MAC, Carlyle also called in the loan at the same time. If I remember correctly, Carlyle eventually agreed to give Pioneer the time to refinance and not let them default, and Pioneer agreed to drop any legal action. Pioneer managed to refinance in the end and that was that. Not a particular happy end for shareholders.
Thanks for the helpful context. Clearly, it was a highly unique situation.
First Sentier Investors have breached the 5% ownership threshold in Mayne Pharma, now owning nearly 5.3%.
I’m not certain if it’s them/their Australian Small Companies Fund accumulating, but that specific fund shows a history of decent outperformance versus its benchmarks.
FWIW, comments on HotCopper are interpreting the filing as a sign of confidence that the pending deal will close.
https://www.firstsentierinvestors.com.au/au/en/adviser/our-funds/australian-equities/australian-small-companies.html
First Sentier has increased its position to 6.6%.
Cosette has issued another termination notice to Mayne Pharma. This appears to be a formal follow-through on its earlier “Additional Notice” (mentioned in June 4 communnication) and the threat to terminate the deal after the five-day notice period. The alleged issues are apparently related to previous due diligence materials provided by MYX. No new evidence or details were included to support the claim.
Mayne Pharma’s stance remains unchanged: it intends to reject the notice as invalid, maintains that there is no lawful basis for termination, and will continue to enforce the buyout agreement through ongoing court proceedings. The shareholder meeting is still scheduled for June 18.
https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02956535-3A669899&v=04711220c3a57065317ba4efca4a3459a4e46882
Make sure everyone votes their shares for the deal!
Shareholder record date for the meeting is 06/16. Anyone has received voting notice from brokers?
Hearing date for Mayne’s lawsuit against Cosette has been set for September 9.
Cosette has also filed a cross-claim, seeking for the SID to be terminated, for MYX to pay Cosette the break fee and pay unspecified damages.
Shareholder meeting still scheduled for June 18.
https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02956831-3A669935&v=04711220c3a57065317ba4efca4a3459a4e46882
As expected, shareholders approved the deal.
“Subject to Mayne Pharma successfully challenging Cosette’s purported termination of the Scheme Implementation Deed, Mayne Pharma will seek orders from the Supreme Court of New South Wales for the approval of the Scheme at the Second Court Hearing, currently scheduled for 9:15am (Sydney time) on Thursday, 18 September 2025.”
On a positive note, also see that Cosette has decided to progress with FIRB approval:
“The Scheme is also subject to regulatory approval from the Foreign Investment Review Board or FIRB. As at today’s date, FIRB approval has not yet been obtained, however Cosette has agreed with Mayne Pharma to continue to progress the FIRB application and to gain approval. Any update regarding FIRB approval will be notified to Shareholders via the ASX”
Not sure how to interpret this point. On the one hand Cosette is trying to get out of this deal in any possible way, on the other they agree to progress with the FIRB application. Any views?
I haven’t checked, but I would assume that the merger agreement requires that they make an effort to fulfill all regulatory requirements. Otherwise, reluctant buyers would tank deals intentionally.
Cosette served a termination notice of the agreement, I would be surprised if they were obliged to agree to progress with the regulatory approval process after termination.
Until the court says otherwise, the buyout agreement remains in force, so both sides are kind of expected to comply. Maybe Cosette could try to drag their feet, but that would be a pretty bad look and definitely not great for their reputation.
Isn’t it the other way around? The way I see it is that Cosette has terminated the agreement, so from Cosette’s point of view the agreement is not currently in force (see art 15.2 of the agreement https://www.maynepharma.com/wp-content/uploads/2025/02/MYX_Mayne_Pharma_enters_Scheme_Implementation_Deed_with_Cosette.pdf). Therefore Cosette think they no longer need to comply with it, apart from those clauses that are explicitly stated they would still be in force should the agreement be terminates (bus as I understand helping with regulatory approvals is not one of them).
Mayne had to go to court in order to get a ruling that the termination is unlawful, therefore they are asking the court to confirm the agreement is still in force.
Just trying to figure out Cosette’s real intentions and expectations. Assuming my reasoning above is correct, why would they help with the regulatory approval of a deal they want to get out of, especially as they are not obliged to do so? It’s actually a lot of work required on their part as the acquirer. Is it because Cosette does not have high confidence in the court ruling in their favour? Do they still want to deal to close but they are just trying to renegotiate the terms?
Would be great to hear from others members who have experience on the legal side, but so far I’d agree with Tyche. It does seem like Cosette isn’t strictly obliged to proceed with the FIRB process. The only clauses that remain binding after termination (according to the agreement) are things like public disclosures, confidentiality, and break-fee obligations. There’s no mention of regulatory approvals. And, as I understand, regulatory approval isn’t something that might’ve ‘accrued before termination’ either.
So the fact that Cosette agreed to move forward anyway suggests they’re acting in good faith and are open to negotiating. I’d say that improves the odds of a timely settlement.
Technically, even from the MYX’s point of view, Cosette hasn’t yet defaulted on any of its performance obligations (including working with MYX on the FIRB application); and it’s wise for Corsette to like to keep it that way at this moment.
MYX is suing to declare Corsette’s termination notice invalid.
MYX is not yet able to sue Corsette for its failure to pay the merger consideration, because the payment is not due yet.
Out of curiosity, I asked Copilot for previous examples in which efforts were made by the buyer to progress with the regulatory approval despite having terminated the merger agreement based on a MAC. Below is the answer I got, which probably means Cosette’s behaviour on this matter does not necessarily imply they actually prefer to close the deal.
“In both Akorn v. Fresenius and Tiffany v. LVMH, the continuation of regulatory approval efforts after a purported termination of the merger agreement played a subtle but strategic role. Here’s how it unfolded in each case:
1. Akorn v. Fresenius
Regulatory Process Continuation:
Fresenius continued to engage with regulatory authorities even after it sent a termination notice in April 2018. This was not because it intended to close the deal, but rather to:
– Preserve its legal position in the event the court ruled the termination was invalid.
– Demonstrate good faith compliance with its obligations under the merger agreement, which required the parties to use “commercially reasonable efforts” to obtain regulatory approvals.
Why It Mattered:
– The Delaware Court of Chancery noted that Fresenius did not act in bad faith by continuing the regulatory process while also litigating to terminate the deal 1.
– This dual-track approach strengthened Fresenius’s credibility, showing it was not simply looking for a way out but had legitimate concerns about Akorn’s regulatory failures.
2. Tiffany v. LVMH
Regulatory Process Continuation:
LVMH’s behavior was more controversial:
– It delayed submitting antitrust filings in certain jurisdictions (notably in France), which Tiffany argued was a breach of the agreement.
– LVMH also cited a letter from the French foreign ministry as a reason to delay the deal, which was widely seen as a political maneuver.
Why It Backfired:
– Tiffany sued LVMH in Delaware, alleging bad faith and intentional delay of regulatory approvals.
– The court never ruled on the merits because the parties settled, but LVMH’s actions were perceived as undermining its MAC claim and damaging its legal posture.
Key Takeaway:
Continuing with regulatory approvals after invoking a MAC can serve as a protective legal strategy:
– It helps preserve optionality in case the court compels closing.
– It demonstrates compliance with contractual obligations, especially if the agreement includes “reasonable efforts” or “best efforts” clauses.
– However, selective or inconsistent engagement with regulators (as in LVMH’s case) can be used as evidence of bad faith.”
Is the date 18 Sep 2025 just a placeholder or or do we expect the court to issue any decisions within 10 days of the scheduled Sep 9 hearing for the Cosette lawsuit?
First Sentier ceased to be a substantial holder on June 17, with the stake dropping below 5%. Wondering how to read that as there haven’t really been any major updates from MYX.
Tyche – you say “Cosette has terminated the agreement”. Neither party can unilaterally terminate the agreement. If that was the case, parties would be terminating mergers whenever the direction the wind blows changed. Cosette has stated that a MAC has occured, but it does not get to decide this fact on its own. It’s like any other legal agreement, if the parties don’t agree, a court of law will decide.
I agree with the second part of your sentence, but disagree with the first. Each party can unilaterally terminate an agreement if they think they have a right to do so based on the specific clauses stated in the agreement, then it’s just a matter of establishing whether the termination was lawful or not (in this case Mayne thinks it’s unlawful and therefore went to court, for the court to declare that the termination was unlawful). In this merger agreement specifically the termination rights are indicated in article 15.
If one made a simple model of outcomes for this case with equal probabilities of the price being 4, 6.5, 7, and 7.4, then the stock should be currently worth 6.225. That implies 25% chance of the deal breaking. You have to go all the way up to a 59% chance of the deal breaking for the current price to make sense. Of course this doesn’t factor in carry, but still interesting.
The share price has been up over the last few days but on low volume.
I could not find any news other than an Australian article about Harvest Lane (paywalled).
https://www.afr.com/markets/equity-markets/hedge-fund-bets-us-suitor-won-t-get-out-of-mayne-pharma-takeover-20250709-p5mdop
Some quotes confirming the same thesis:
“Cosette clearly has buyer’s remorse, but we don’t think there is a basis for them to walk from the deal. They have alleged and not yet substantiated that there has been a material adverse change to Mayne’s business, which Mayne disputes.”
“To us, it looks for all money that Cosette just hasn’t done its due diligence properly, rather than any material change to Mayne’s business since signing.”
“There is minimal precedent in Australian case law for it to be litigated, but some recent cases in the UK should be instructive as to how the Mayne case may proceed, and in that context Cosette’s case looks weak.”
“They have pointed to a “soft” first quarter trading update, but the softness came in January and February and predates their entry into the agreement. They’ve pointed to a recent lawsuit against Mayne, which is just the latest development in a dispute that runs all back to 2022. There’s also letter from the US Food and Drug Administration that took issue with a single marketing presentation for one of Mayne’s contraceptive products. The matter is already closed out, and we’re yet to find a company that has had a material adverse hit to sales after receiving a similar letter.”
Based on the setup, when is the deal likely to close or not close?
The court hearing is set for September 9. In the best-case scenario, we’ll see a settlement before then. If not, a decision could take a few more months. But I still think this ends in a settlement one way or another.
Mayne Pharma has received another notice from Cosette. This time, Cosette alleges a breach of a different clause of the Scheme Implementation Deed (SID) — clause 7.1(b).
The new claim centers on alleged “breaches of misleading or deceptive conduct laws and continuous disclosure obligations”. All of this is related to the FDA Untitled Letter that was originally disclosed back in May.
I’m not a lawyer here but this appears to be more legal posturing from Cosette. The fact that this allegation wasn’t in their original termination notices makes it look like an afterthought.
Cosette is mud slinging here. The theory is that Cosette don’t actually want to pull out of the deal – it’s their lenders who want to (but can’t withdraw funding as they’ve already signed binding commitments). Justice Black, the Australian judge presiding over the case, is very commercially minded (check precedents) will see right through this. Bullish for MYX
First Sentier has again crossed the 5% ownership threshold, now holding a 5.03% stake. The firm bought 68k shares since late July at an average price of A$5.11/share.
https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02978234-3A673422&v=4a466cc3f899e00730cfbfcd5ab8940c41f474b6
The trial start is delayed by a few days to Sept. 22.
https://www.lawyerly.com.au/trial-over-cosettes-termination-of-672-maybe-pharma-merger-delayed/
Also, I found an X-Account that follows Mayne very closely:
https://x.com/fabreres
From the latest Harvest Lane fund letter:
https://harvestlaneam.com.au/wp-content/uploads/2025/08/Absolute-Return-Fund-July-Report-Public.pdf
dt
Are you suprised that Harvest has “significantly risk managed down our position in this deal as it has progressed”? Do you have any thoughts on how much they have reduced their position?
That is a bit concerning, but the important thing is that they’re still actively involved and participating in the court proceedings. It’s also not clear what the size of their position was/is. I continue to hold and wait for the near-term resolution. A settlement is still possible as well.
In the worse case for Corsette, can Cosette pay a break fee and walk, or can MYX force Cosette to complete the acquisition?
In the worst-case scenario, the court finds that Cosette had a valid basis to terminate the agreement; the deal breaks, and Cosette pays nothing. A more probable risk is a very big cut to the acquisition price.
What I mean by “worse case” is the worse case for Corsette (and likely the best case scenario for MYX).
If the best the court can do for MYX is to force Corsette to pay a relatively small break fee and is not able to force the transaction through, then the risk/reward is not very attractive.
You never know what the court will decide is a fair remedy but Cosette cannot just wilfully breach the agreement by walking away and just pay the small break fee:
14.6(a): Despite anything to the contrary in this deed (but subject to clause
14.6(c)), the maximum aggregate amount that Cosette (and the Cosette
Group) is required to pay to Mayne in relation to or under this deed
(including as a result of any breach of this deed by Cosette) is the
amount of the Cosette Break Fee and in no event will the aggregate
liability of Cosette (and the Cosette Group) under this deed or in
connection with the Transaction or the Scheme (including, but not limited
to, for any and all Claims, actions, damages, losses, liabilities, costs,
expenses or payments of whatever nature and however arising in
connection with this deed) exceed the amount of the Cosette Break Fee.
14.6(c): Clauses 14.6(a) and 14.6(b) do not apply in respect of any fraud or wilful
or intentional breach of this deed by Cosette. Nothing in this deed,
including this clause 14, will limit Mayne’s right to recover damages
(whether on its own benefit or on behalf of a person for whom Mayne
holds rights on trust under this deed) for any fraud or wilful or intentional
breach of any provision of this deed by Cosette, or otherwise limit any other remedy available to Mayne under this deed.
14.6(d): Cosette acknowledges and agrees that Mayne is entitled to seek specific
performance or injunctive relief as a remedy for any actual or threatened
breach, in addition to any other remedies available at law or in equity
under or independently of this deed, and that damages or payment of the
Cosette Break Fee may not be an adequate remedy for Mayne or
Mayne’s Shareholders for any breach of this deed.
“You never know what the court will decide” – this is very true. Australia’s governance and institutions continue to erode year after year.
MYX posted fairly positive annual results yesterday. Nothing that will swing the trial outcome decisively, but the big negatives were avoided. The stock rose +3%.
FY25 underlying EBITDA was A$47m. While that is only in line with the lower end of guidance (A$47–51m), it confirms a strong business rebound in Q4. For comparison, Q3 EBITDA was -A$2m, while H1’25 was A$31m. It is not clear against what baseline Cosette will argue EBITDA breach, but the fact that the slump proved to be temporary (as MYX’s management has always said) is positive.
AFR reported Cosette’s comment:
That sounds weak-ish. If they had a solid case and a clear way to show a covenant breach, they would’ve stated it directly by now instead of still leaning on a temporary slump that is in the past. That type of H1 to H2 comparison used by Cosette is clearly flawed and would not hold up in court.
Nextstellis (the drug previously addressed in the FDA letter) does not report separate revenues by quarter. However, reported demand cycles (a volume metric for prescription cycles dispensed, the drug is a contraceptic) were strong in Q4, showing 8.2% QoQ growth. That is an acceleration compared with the sequential growth in prior three quarters (2–5%). Q4 was partially impacted by the marketing materials change that followed the FDA letter, so the fact that the performance wasn’t hurt also looks positive.
Nothing new was noted on the TXMD lawsuit.
The trial starts from September 22. I continue to think this is an interesting setup, with a resolution coming soon.
Presentation https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02917615-3A662600&v=c2533a54e2514fb77a8f93f84db686e1125273e9
AFR https://www.afr.com/companies/healthcare-and-fitness/mayne-pharma-dodges-questions-on-financial-results-20250828-p5mqph
A new AFR article came out. The main takeaway is that ASIC is now making inquiries. The piece also puts a hard number on the discovery battle: Cosette subpoenaed 800 documents, and Mayne tried to withhold or redact 640. Key catalyst remains the September 22 court hearing.
https://www.afr.com/companies/healthcare-and-fitness/mayne-and-jefferies-on-asic-radar-over-disputed-672m-takeover-bid-20250903-p5ms5w
Readers without prior background knowledge about the situation will likely get an impression from the AFR reports that Mayne is the bad guy here and is tainting the reputation of Australian capital markets.
My own impression is that either Mayne is not completely clean, still hiding something, or the company’s IR or publicists are doing a very poor job telling their side of stories to journalists or the public.
It’s concerning that the thesis is built on Cosette getting cold feet, yet the journalists didn’t even include a hint about that.
DT, what’s your take on this?
does not look good share dumping -15%, https://www.afr.com/companies/healthcare-and-fitness/south-australia-asks-firb-to-block-cosette-s-672m-mayne-takeover-bid-20250904-p5msb3
Could you summarize the article given it is behind a paywall? I don’t understand what right a politician has to influence the blockage of the deal – I assume it is just some sort of attempt to win political points but carries no legal weight. Then again, with governance the way it is in Australia, anything is possible…
DT, with a couple of announcements/articles and a massive drop in price your update it very much needed on this one.
MAC success looks challenging for Cosette, but the FIRB politics give it some extra leverage to seek a price cut even if MAC fails.. maybe FIRB imposes conditions (keep Salisbury open for a period)!?
I have added to my (small) position; this special situation is more risky as the “pro” arbs will probably trade directly from the court room. Would add more after the hearings. The difficulty is assessing the downside.. can it go below A$4.5 if there is a deal break – let’s assume so:
Probabilities:
30% enforce @ 7.40
40% re-cut @ 6.50
30% break @ 4.00
EV ≈ A$6.02 (still ~33% upside from current level)
@G98:
SA Government has asked FIRB to block after being told of a potential closure of Mayne’s Salisbury (Adelaide) plant. That intervention raises the regulatory bar (or conditions) and is politically salient given “sovereign capability” rhetoric. Treasurer Chalmers ultimately decides. Key nuance: there’s reporting that the “closure” was notified to FIRB in July due to Mayne’s deteriorating financials and tariff risk, and Cosette disputes it was their plan, framing it as Mayne’s own disclosure of options. This makes the politics thornier but doesn’t itself prove a MAC.
FIRB cannot be waived under the scheme; it sits alongside court approval and shareholder vote as non-waivable CPs. FIRB is therefore an independent gating item even if Cosette loses the MAC fight. I expect potential conditions (e.g., commitments to keep the plant operating for X years) rather than an outright prohibition, consistent with recent FIRB practice of attaching conditions on sensitive assets.
@dt:
What do you make of the recent events?
Any thoughts on news yesterday and decline in stock. Thanks
So to summarize, several negative updates have come out recently:
– Cosette told Australia’s foreign investment watchdog (FIRB) that if the buyout proceeds, it would close MYX’s Adelaide manufacturing plant. Adelaide is located in South Australia (one of Aussie states).
– South Australia’s premier sent a letter to FIRB, urging the deal be blocked as plant closure would cut 200 jobs and result in loss of “sovereign capability” in drug manufacturing.
– MYX said it was “aware” of communications between Cosette and FIRB, but somewhat confusingly claimed the letters it reviewed made no mention of a plant closure.
– One of the recent AFR articles noted that MYX was also planning to close the facility and told about it to FIRB. MYX denied this in today’s press release, saying it never made such a statement.
– Cosette also alleged that MYX withheld 640 of the 800 subpoenaed documents. MYX eventually released 504, but those were heavily redacted. Australian Securities and Investments Commission has now reportedly taken interest but will wait for the court outcome before deciding whether to intervene.
On the back of all this, MYX shares fell 15%.
The situation has certainly become murkier. I’m still weighing my position and will update the board in due course. The chances of a quick settlement with a modest price cut now probably look lower.
Regulatory risk is hard to handicap given the limited information on the Adelaide facility. What is clear, however, is that the site is not central to MYX’s business. AFR got it wrong again, suggesting the plant manufactures “Mayne’s contraceptives and menopause drugs”. The scheme document, however, makes it clear that all of MYX’s own products are outsourced to third parties (mostly in the US) while Adelaide is mainly used to provide CDMO services for other companies. The company doesn’t disclose much about those operations, so it’s hard to judge how important the facility is for “sovereign capability” or how regulators will react.
Cosette may well be bluffing and just continuing to throw things at a wall to see what sticks. If the plant is valuable and viable, why shut it down rather than sell or lease it? MYX spent A$18m on a “modernisation” last year, which doesn’t exactly suggest it’s a dead asset. However, if the plant is indeed an important asset in the local pharma industry, regulators might be willing not to take any risks and collect political points instead.
I don’t ever recall a buyer trying to tank a deal by saying that if the deal is completed it will take action that is adverse to the state so that the state will object to the deal. Has anyone seen this before? What has the target done to fight this type of argument?
MYX lawyers should also subpoena Cosette internal communications related to and surrounding their decision to notify FIRB about the closure plan, if it’s indeed, as claimed by MYX, Cosette’s plan and Cosette that made the notification .
If anything is discovered suggesting that the notification and plan was motivated by Cosette’s desire to self-sabotage the merger, it will look pretty bad in court.
AFAIK under Australia’s regime, it’s the “foreign person” (i.e., the acquirer/investor) who must notify and obtain approval before taking a notifiable action, but I’m sure they are already at it :-)
MYX lawyers would probably subpoena communications between Corsette and Avista Healthcare Partners, Hamilton Lane, and the deal’s lenders, and even their internal communications.
A settlement is more likely if they expect some public embarrassment.
Mayne is now openly saying that Cossette is threatening to close Maybe’s Salisbury plant only to get out of the deal.
From the recent AFR article:
https://www.afr.com/companies/healthcare-and-fitness/mayne-pharma-says-suitor-s-plan-to-close-factory-is-not-credible-20250911-p5mu6k
Has anyone heard any news from the trial? Is anyone attending the trial?
I haven’t seen any first-hand reports from anyone attending the trial, though some posters on HotCopper have mentioned they might try to drop in. We did get an update from the cross-examinations this week via an AFR article:
– Cosette’s lawyers attempted to introduce handwritten notes from a Mayne director which reportedly raised a “concern onto management integrity” after seeing the disappointing February financial results. This was likely intended to support their claim of “misleading or deceptive conduct.” Mayne’s lawyer objected, and the judge ruled the notes were irrelevant.
– The AFR article also noted that when Cosette’s own top executives, including the CEO, were questioned on Tuesday about meetings and messages related to Mayne’s forecasting, they “often said they did not recall.” This is generally not a good look in court for Cosette.
– Mayne’s CEO was questioned about the board’s reaction to the weak February numbers. He acknowledged they were “disappointed” but not “shocked,” and pushed back on Cosette’s narrative.
https://www.afr.com/companies/healthcare-and-fitness/mayne-pharma-director-questioned-management-integrity-court-hears-20250921-p5mwsx
Lez
Thanks for the update. I don’t subscribe to AFR
Another positive update – MYX announced that its oral contraceptive, NEXTSTELLIS, has been approved for reimbursement under Australia’s Pharmaceutical Benefits Scheme (PBS), effective October 1, 2025. This should improve the drug’s affordability and market access, and also maybe weaken Cosette’s narrative of a sustained and material decline in business performance.
“Without listing on the PBS NEXTSTELLIS® would cost more than $328 per year. Women will now be able to access NEXTSTELLIS® at $31.60 for 3 months supply for general patients (reducing to $25 from 1 January 2026). Concession card holders will be able to access NEXTSTELLIS® for $7.70
for 3 months supply.”
https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02999839-3A677366&v=c2533a54e2514fb77a8f93f84db686e1125273e9
One HotCopper user who attended the trial recently shared his thoughts (see below).
https://hotcopper.com.au/threads/anyone-attending-the-hearing.8779237/?post_id=80944688&embed=1
Ben Bailey from Harvest Lane recently shared a new piece on the FIRB approval risk. To remind, Cosette had previously threatened to close MYX’s Adelaide facility, after which the South Australian government asked FIRB (foreign investment watchdog) to block the merger.
Ben argues that there is a lack of commercial logic in closing the Salisbury plant, since it is profitable and was recently upgraded. Even if Cosette decided to get rid of the plant, selling it would be a much more lucrative option, as the business could reasonably “operate under another owner,” and there would likely be no shortage of bidders.
Ben also noted that even if Cosette were to close the plant, FIRB would have no real basis to block the deal, as Salisbury is not nationally significant, the buyer is from an allied nation, and the transaction’s scale is small relative to the FIRB threshold. Blocking it would send a negative message to foreign investors that Australia is “closed for business.” FIRB’s decision deadline was recently extended to October 31.
https://www.livewiremarkets.com/wires/cosette-can-get-firb-ed
I notice that Harvest Lane gets a lot of respect. When I listen to what they say it sounds highly intelligent with deep knowledge. However, when I last checked their investment performance it was pretty damn unimpressive (even considering the conservative mandate). That’s the story with the vast majority of people out there. In the end if they were as good as they sound it would be reflected in their track record.
Hopefully the SA government has gained enough goodwill from its voters by requesting that FIRB cancel the deal that it does not feel that it has to push the isssue. Harvest Lane’s arguments might be 100% valid, but recently so many of these types of decisions (at least in the US) seem to come down to political interests, not national interests.
They run an absolute return strategy which should be benchmarked vs. the cash rate – they have done very well in that regard
They can ascribe to the lowest possible benchmark possible, it doesn’t mean their strategy carries the equivalent level of risk to that benchmark or that there performance isn’t out of sync with their apparent expertise.
I think their performance is decent for the kind of strategy they are running.
Note that most of the special situation ideas on SSI are suitable only for very small accounts, for trading liquidity reasons.
If one is running a larger account or fund, and looking for special situation ideas and absolute returns, the opportunity set is much smaller and you can’t expect very exciting returns even from very smart/knowledgeable/intelligent managers.
An overview of the pending litigation was published in Capital Brief. The author appears to have been in the courtroom firsthand. Anyone has access to the blog and could provide a summary, by any chance?
https://www.capitalbrief.com/article/mayne-pharma-flags-internal-tension-in-cosettes-672m-takeover-escape-bid-f4c2ad7c-3445-4411-893a-ccd97be06fbd/
The court ruled in favour of MYX
https://www.afr.com/companies/healthcare-and-fitness/court-rules-us-giant-can-t-terminate-mayne-pharma-takeover-20251015-p5n2nr
Here is an article:
https://www.capitalbrief.com/briefing/supreme-court-rules-cosette-pharmaceuticals-cannot-walk-away-from-acquiring-mayne-pharma-ce97a4b1-9bc2-4b7c-af81-a6714fe34764/
The 2 questions for me are now:
1. Can the Foreign Investment Review Board approval need derail a closing?
2. Can the court ruling force a close of the transaction if Cosette refuses to do so?
Great outcome! Cosette can still appeal, and FIRB approval is still pending (deadline October 31). The FIRB risk looks small. MYX should open significantly higher tomorrow. Hopefully, both sides agree to settle at a symbolic cut rather than dragging this out any further.
What target would the price have to hit for you to exit tomorrow?
MYX has announced that the second court hearing date (after which the transaction can close) has been rescheduled to November 3 to allow for FIRB approval before then (deadline October 31). The merger outside date is set for November 20, so there appears to be a margin of safety even if there are delays in FIRB approval. And my understanding is that the court could potentially extend the outside date should we see longer delays.
https://announcements.asx.com.au/asxpdf/20251021/pdf/06qt969bjz1vp4.pdf
MYX is trading at 15% discount to the offer price of A$7.4.
The market doesn’t seem to believe that the deal can be consummated at the original offer price.
An interesting recent article from the AFR discusses the court decision and its implications for Australian M&A. The key takeaway is that the case reaffirms the high threshold for establishing a material adverse change.
https://www.afr.com/chanticleer/justice-black-s-mac-attack-should-cut-the-bulldust-20251020-p5n3o9
Sharing an interesting post on X discussing the risk of Cosette waiting until the last possible day, November 12, to file its appeal. This would leave only eight days until the merger termination date (November 20), which cannot be extended unless both parties agree. That would be a very tight timeline, especially considering the scheme would also need to be implemented through the court. However, the first reply to that X post highlights that courts can sometimes move very fast in certain cases and it might do so here as well.
https://x.com/toy59496/status/1980816786548486416
Sharing an interesting comment from HotCopper on the FIRB approval risk. The key takeaway is that if FIRB blocked the transaction on the basis of “loss of local jobs,” it would set a precedent allowing any potential acquirer of an Australian company to enter into an acquisition agreement, review a competitor’s books, and then simply walk away by threatening local jobs.
https://hotcopper.com.au/threads/ann-outcome-of-litigation-and-update-on-scheme.8829196/?post_id=81327531&embed=1
This is exactly what seems to have happened. I’ve been banging on about the deterioration of governance is Australia for a long time. It caused me to leave the country more than a decade ago yet it continues to get worse.
An immediate update is required on this one.
I think the key question is now whether there is anything Mayne can do to extend the outside date. If it could be extended another month would give time for other parties to weigh in – or for Mayne and Cosette to renegotiate the price if there is any interest in that.
That was clearly not what I expected, and it seems to be a very dumb decision by the government. While this is still called a ‘preliminary view’, it is most likely to prevail in the ultimate FIBR decision (as treasurer has the final say).
This AFR article sums up the the situation pretty well (https://www.afr.com/companies/healthcare-and-fitness/chalmers-all-but-kills-mayne-pharma-takeover-bid-20251031-p5n6qu):
What’s next?
FIBR’s final decision is now expected by 7th of November, which would still fall within the required scheme timeline. But that decision is very likely to be a negative one.
The press release issued by Mayne Pharma, does not inspire any hope. The company highlighted that it was and still is fully excluded from any discussions Cossette is having with FIBR and noted once again that:
So I think the only positive (but very low likelihood) outcomes from this situation are:
1) The backslash from investors/markets and maybe other government bodies forces FIBR/Treasurer to reconsider and change the opinion in the final decision.
2) Mayne/Cosette renegotiate acquisition at a lower price, which Cosette then can use as an excuse to keep the Adelaide plant open and in turn satisfy treasurer’s concerns regarding threatened job losses. But that’s probably too far fetched and would make regulators look like idiots.
3) Mayne goes to court arguing that Cosette failed in its obligation “to use its best endeavours to obtain the Treasurer’s approval of the Scheme”. This would be very hard to prove, however.
I intend to exit my position. In total 13% loss from the write-up levels.
Having said that, Mayne shares are at pre-announcement levels, so further downside from the current prices is likely limited and it might be worth holding on till Nov 7 for any Hail Marys.
Why have so many people exited without the final nail in the coffin and the price where it is?
The treasurer seems to be a literal moron, easily manipulated and unable to see how this attempted short term political gain will create economic destruction of a magnitude far greater than the empty threat of plant shutdown.
“”We’ll always go into bat for Australian workers and that’s what we’ve done.”
There it is, the nauseating sporting analogy from an Australian politician…
I’d suggest everyone email mp chalmers. It takes 5 minutes.
[email protected]
What makes the whole thing very intriguing is that Chalmers previously wasn’t known as a moron, and most likely he reads AFR and the Australian, both of which are now publicizing the obvious that he’s been played by Cosette, an American company.
And he probably doesn’t gain much politically from blocking the deal, because no workers were asking for his help and no one is publicly praising him so far.
All i can say the more people that email him and express the error of his ways, maybe he will reconsider.
BKGal, Great idea. I just sent one.
I’ve just sent an email as well. Encourage others to do the same.
While I don’t have a position, i’m concerned of the precedent going ahead with this decision would send.
Irrespective of the outcome here, this debacle highlights that the treasurer possesses unfettered power and consequently the political risk of Australia remains.
I hope we can dodge a bullet here, but the reality is the treasurer will continue to have bullets to fire in the future, unless there is a revision of the powers granted to him (not bloody likely).
Well worth reading and logically irrefutable from Harvest Lane – but does that mean anything in Australia anymore? Does this one come back from the precipice (and the can get kicked down the road), or does governance in Australia move one step closer to the abyss?
https://harvestlaneam.com.au/wp-content/uploads/2025/11/Letter-to-Dr-J-Chalmers-Harvest-Lane-Asset-Management.pdf
Is it required or standard practice for the Treasurer to make a public statement regarding their preliminary view regarding FIRB decisions? If not, perhaps the Treasurer has shared his thoughts in order to gain more information about public opinion.
I’m not sure, but I suspect it isn’t normal.
Given today the FIRB decision date has been moved from 7-Nov to 14-Nov (previously December!), I think the blowback/dismay/disgust has been observed, and now I suspect/hope he is going to come up with a conditional approval.
If he was going to reject it outright there would be no need to push the date back, simultaneously, if he was going to approve it unconditionally, that ought not to take anymore time either. However, time to draft a conditional approval that somewhat appeases the capital markets (or anyone with a conscience), yet continues to achieve political objectives may require more time to conceive. That’s my read of the situation as of today, but that take could be driven more by hope than logic.
It appears from the ASX notice that the change was announced no later than 3:00 PM. Why didn’t the stock rally between 3:00 and 4:00? I must be missing something.
You’re right, it was released during market hours. I guess the market literally didn’t see it as material.
Based on my hope :-D, the best outcome would be for Cosette to acquire MYX minus the Salisbury plant at the original price, and for the Treasury to pay MYX shareholders additional A$100m to nationalize the extremely and nationally strategic Salisbury plant.
Latest article
https://thewest.com.au/opinion/peter-swan-dimitri-burshtein-governments-interventionist-streak-a-cause-for-concern-c-20574802.amp
Please.send an email to Chalmers if you haven’t. It takes 5 minutes and it is making a real impact
AFR just reported that IDT Australia, a tiny local pharma, has put in a non-binding bid to buy Mayne Pharma’s manufacturing site in Salisbury. No word yet on price or details. IDT’s market cap is just A$25m, so it’s not clear how the financing would look like. Hard to say if anything actually happens, but this just shows again that Cosette’s threats to close the plant instead of selling it were nonsense. All of this might push the Treasurer to reconsider and greenlight the takeover.
https://www.afr.com/street-talk/asx-listed-pharmaceutical-tiddler-bids-for-mayne-s-adelaide-plant-20251106-p5n8au
Also – Mayne has just filed to the Australian Takeover Panel requesting permission to engage FIRB directly. Very positive developments here and above. Cosette is likely snookered
The latest AFR article painted a very negative picture of Cosett and Avista’s CEOs.
Burgstahler is now persona non grata in Australia.
““It is very unclear to us how Cosette’s conduct is meant to build or even preserve goodwill for Cosette’s private equity backers, who presumably wish to buy and sell other businesses in Australia and overseas in the future,” says Alexander Whitman, an analyst with Tagliaferro’s TGI Holdings.
“Why should Cosette’s behaviour – driven, we believe, by its private equity owners – be rewarded when there remains an open path for [Chalmers and the FIRB] to conditionally approve the transaction.”
None of this is likely to worry Burgstahler, who had never been seen on the Australian dealmaking circuit before and likely never will.”
Trading is halted pending an announcement about the merger https://www.maynepharma.com/investor-relations/company-announcements/
So the Takeovers Panel announced an interim order that prevents Cosette from terminating the merger on the basis that the merger end date (November 24th) has lapsed, unless the Panel consents. The order will remain in effect until the earlier of: (1) two months from today, or (2) further orders from the Panel. A big positive for MYX.
Wasn’t the previous outside date Nov 20 and the panel has extended it only until Nov 24 so far?
The panel could (?) probably push it again, though.
I think the interim order effectively pushes the real outside date to around 14 Jan 2026 (i.e., 14 Nov + 2 months), because it restraints Cosette from terminating the merger based on the expiry of the outside date on the book.
Did anyone else notice the announcement that Mayne posted today (Australian time)? It seems incredibily positive for the deal going through at AUD$7.4 with some conditions established by FIRB. Here is a part of the text:
“The Panel has also made final orders (Annexure B) including orders requiring Cosette Pharmaceuticals, Inc. to agree to any conditions reasonably required by the Treasurer (in relation to FIRB approval) in connection with the Salisbury Site (including conditions reasonably restraining its closure) that are not inconsistent with Cosette’s prior intentions disclosure in the Scheme Booklet.”
The release is posted at https://www.maynepharma.com/investor-relations/company-announcements/
The release does not seem to have been picked up by the news services. I have been able to buy some shares of the US pink sheet listed ADR (MAYNF) at, what I consider, attractive levels (AUD$5.5 – 6). Size is small and I’m giving up on it.
How do others interpret the news release?
So the question remains: will FIRB reject or approve (conditionally)?
There is also another Document from Nov 18 iirc about cosettes debt Arrangements expiring on Nov 24.
It’s just such a tight Deadline to avoid further shenanigans.
MYX seems to believe that Cosette’s financing issues are Cosette’s own problem to solve.
“The Scheme and Cosette’s payment obligations are not in any way conditional on the availability of the current Debt Facilities disclosed in the Scheme Booklet, or any other financing arrangements of Cosette. Mayne Pharma intends to take all reasonable steps necessary to enforce its rights under the SID”
The harsh language in the Takeover Panel’s final order seems to indicate that Cosette has become public enemy in Australia.
It’s pretty clear from today’s announcement that the Takeovers Panel has given FIRB wide latitude in setting conditions. I don’t see how FIRB doesn’t give approval, with conditions.
FIRB has officially rejected. https://au.finance.yahoo.com/news/treasurer-blocks-us-takeover-aussie-002057759.html
That is incredible. Not just for this trade, but for Australia in general – year after year governance standards continue to erode alarmingly.
I’m blown away by this decision. The Takeover Panel instructed FIRB that they had cart blanc to put restrictions on Cosette and instead of using restrictions the decision is made to throw out the baby with the bathwater. I’m not sure how to look at Aussie positions going forward.
Just need to apply an emerging market kind of equity risk premium…
MYX’s last resort is asking Administrative Appeals Tribunal for a review. But again it seems that only the buyer can exercise that option, not the company. FIRB rules look very stupid now.
AFR also mentioned that “Shareholders said on Friday the deal now appeared to be dead, but some were considering a possible class action lawsuit over Cosette’s intention to close the Salisbury site and when that was disclosed to the market.”
Snowball,
I’m not sure that the shareholders of MYX.AX would have any standing to sue Cosette. Maybe Mayne can sue Cosette.
The stock is trading now at 0.6x revenue, and nothing has changed on the fundamentals, right? So it is quite cheap now. What would be your view on a double-down here, with the aim of getting out at b/e?
The most instructive thing here is where it had ended up trading relative to the expected price on break ie way, way lower.
Greenblatt’s views on merger arbitrage seem increasingly valid (just don’t!).
My New Year’s to do list: place most of merger arb positions in my portfolio on run-off mode.
While I am yet to do a proper review on my merger arb/privatization offer history (short and limited as it is), my default inclination is to now ‘bin it’ in its entirety. I find myself dismissing new merger up pitches in under a minute. Privatization offers I am more inclined towards.
Situations like BHIL and MYX (though I didn’t lose much here because I have no faith the Australian governance and stepped out at the 11th hour), mean I have to size so small for unforeseen disaster that it isn’t worth the stress/brain damage.
TWTR, ASCX, EQLS were my initial forays into the area – I then followed up with BHIL, PGH, and MYX. So, it seems like I actually suck as this, and that my initial investments, which brought success were a false prophet.
Perhaps I shouldn’t lump privatizations into the same bucket as merger arbs? Either way, this general area seems to carry a deceptively poor risk/reward when the frequency and magnitude of outcomes are considered.
For base rates, a full review of all situations posted on SSI would be far more instructive, but I’m not going to touch the vast majority of them, hence focusing on the sample of SSI ideas that I engaged in after assessing all the ideas posted.
what’s your definition of privatization (vs merger)?
Privatization – management buyout or a transaction that results in the cessation of the public trading for the company’s shares I guess.
@G98
So, do I understand you correctly that:
Privatization = buyout by management or sponsors (i.e. private equity),
Merger = buyout by strategic (i.e. peers).
and you believe that the former category generally offers poorer risk/reward than the latter?
Yes, those definitions make sense.
No, I meant the entire group mergers and/or privatizations seem to have a poor risk reward.
I was highly selective but still lost out. It might be that I’m just no good at it, but it could also be the area is not as promisng as it appears on the surface. E.g. MYX has been smashed post break.
Court declared Mayne to receive A$13m+ from Cosette. While there doesn’t seem to be any active M&A angle anymore, the stock has been beaten down to A$2.45/share. Wondering if anyone is playing these broken arbs where the deal break reason was seemingly not due to target fundamentals deteriorating. LNSR is also a good example, trading way below where a seemingly smart buyer wanted to buy them out. Deal prices often include control premium, so we have to discount the price a bit but even that in mind, there’s ~100% theoretical upside on both MYX and LNSR.