Mayne Pharma Takeover Faces Uncertainty as Panel Flags Market Misleading and FIRB Risks

Background to the Dispute

Mayne Pharma Group Limited, an ASX-listed pharmaceutical company with a significant US-based business and a manufacturing presence in Salisbury, South Australia, has been at the centre of a takeover dispute involving Cosette Pharmaceuticals, Inc. The acquisition, valued at $7.40 per share, was structured as a scheme of arrangement subject to regulatory approvals and conditions.

Initially, Cosette disclosed intentions to maintain Mayne Pharma’s operations largely unchanged, including retaining employees at the Salisbury site. However, after serving termination notices alleging breaches and material adverse changes, Cosette revised its stance, signaling plans to dispose of or close the Salisbury manufacturing site. This shift was not promptly disclosed to the market or shareholders, raising concerns about transparency and market fairness.

The Takeovers Panel’s Declaration

The Australian Takeovers Panel declared these circumstances unacceptable, emphasizing that the market and shareholders reasonably expected Cosette’s intentions regarding the Salisbury site to remain consistent until after the scheme’s implementation. The Panel found that Cosette’s change of intentions, communicated to the Foreign Investment Review Board (FIRB) but not publicly disclosed until months later, undermined an efficient, competitive, and informed market.

Importantly, the Panel noted that the Court had ruled no material adverse change had occurred, invalidating Cosette’s termination notices and keeping the scheme implementation deed valid. Despite this, Cosette’s revised plans jeopardize FIRB approval, a critical condition precedent for the acquisition.

Orders and Implications

In response, the Panel ordered Cosette to agree to any reasonable conditions imposed by the Treasurer related to the Salisbury site, including restrictions on its closure, provided these conditions align with Cosette’s original disclosure in the scheme booklet. Additionally, both parties must share all communications with FIRB to ensure transparency moving forward.

This intervention underscores the regulatory focus on protecting national interests, particularly regarding pharmaceutical manufacturing capabilities in Australia. The Treasurer’s preliminary view that the acquisition could be contrary to national interest due to potential negative impacts on the Australian economy and community adds further complexity to the deal’s future.

Looking Ahead

The ruling sets a precedent on how changes in bidder intentions must be disclosed and managed to preserve market integrity. For Mayne Pharma shareholders and the broader market, the outcome of FIRB’s final decision and any additional conditions will be pivotal. The situation also raises broader questions about foreign investment in critical Australian industries and the balance between commercial interests and national security.