Former Elan chief executive Kelly Martin and two other founder shareholders of Malin Corp plan to sue to allow them to convert their interest in the Irish life sciences investment firm into direct stock.
The development comes as the Dublin-listed company goes about returning most of €118 million in cash to stockholders.
At current prices, and allowing for the dilutive effect of their founder shares converting into a 6.2 per cent stake in an enlarged number of shares, such a stake would be worth about €18.5 million. The other two founder shareholders involved are solicitor John Given, Elan’s one-time general counsel, and Séan Murphy, a one-time executive with Abbott Laboratories.
Malin, led by chief executive Darragh Lyons, revealed in a stock exchange announcement on Friday morning that the group of founders had sought to have 2.89 million founder shares converted into ordinary stock, saying that a conversion had been triggered by a so-called change of control event.
They claimed that Malin's recent sale of its 65 per cent stake in injectable drugs company Altan for €68 million amounted to such an event. Malin said it has rejected the claim and noted that the founders have stated that they will issue proceedings next Monday in the Irish High Court.
The statement did not name the founders that have lodged the claim, only stating that they account for 88 per cent of all founder shares, or what are also called A ordinary shares. However, sources have confirmed the identities of the individuals.
"The board considers this claim to be without merit and invalid. The original intent of the A ordinary shares was to align the interests of investors and the founders and reward the founders for exceptional value creation. The founders did not create value," said Malin chairman Liam Daniel.
“Although the A ordinary shares also carry conversion rights in the event of a change of control, no such event has occurred. The company intends to take whatever actions are necessary to vigorously defend its position and protect shareholders’ interests, while continuing to operate the business and focus on advancing our assets towards important value inflection points.”
Malin raised €330 million in an initial public offering (IPO) in 2015. It was formed out of a firm called Brandon Point Industries (BPI), which was set up by Mr Martin and Mr Given the previous year. Mr Murphy, also joined BPI before the Malin flotation. All three left Malin between 2016 and 2017.
Malin, whose shareholders have endured a rollercoaster ride since the IPO, confirmed last week that it will begin long-awaited returns to them by using most of its €118 million of cash to carry out a share buyback.
“The precise amount of capital to be returned and the terms of the tender offer will be determined following an evaluation of strategic business opportunities and related cash needs,” it said. “Details of the tender offer will be announced in conjunction with the publication of a notice of general meeting which is expected to occur before the end of 2021.”