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DOYLESTOWN, Pa. — ProPhase Labs Inc., the maker of Cold-EEZE cold remedies, has rejected an unsolicited bid to be acquired by Matrixx Initiatives Inc., which owns the rival Zicam brand of cold and allergy products.
ProPhase said Monday that it first received a nonbinding proposal to be acquired by a to-be-formed affiliate of Matrixx in a letter dated May 29, which was unanimously rejected by the ProPhase’s board. Matrixx then repeated the proposal in letters to ProPhase dated Sept. 6 and Sept. 14, 2012 letter.
In rejecting the $1.40 per share cash bid, ProPhase said the Matrixx offer undervalued the company and its business prospects and was conditioned on Matrixx being given access to nonpublic and confidential ProPhase information. Also, ProPhase said its board determined that the interests of ProPhase stockholders will be best served by the company continuing to pursue its current strategic plan.
"We have successfully implemented a business and marketing strategy designed to deliver superior results to our stockholders over the long term," stated Ted Karkus, chairman and chief executive officer of ProPhase. "First, we preserved the Cold-EEZE brand, then we repositioned the brand, and now we are successfully growing and leveraging the brand. As we have consistently explained to our shareholders, it remains our view that by investing in our Cold-EEZE brand, we are building our distribution platform and pipeline, which has led to securing increased shelf space with our retailers for the upcoming cold season, and which has provided us with the opportunity to introduce new and improved products, including the national launch of Cold-EEZE Oral Spray and Cold-EEZE Daytime/Nighttime QuickMelts for the upcoming cold season."
Karkus added, "During 2011 and 2012, our revenues have been increasing while at the same time, based on available industry data, many competing cough/cold products in our category are experiencing notable declines in year-over-year sales. Therefore, we are not surprised, and in fact flattered, that our most significant cough/cold competitor recognizes our success to date, intrinsic value and future potential that current management has created, by suggesting that they acquire ProPhase."
According to ProPhase, Matrixx is controlled by H.I.G. Bayside Debt & LBO Fund II L.P., a private equity investment fund. ProPhase reported that on Sept. 4, Matrixx purchased for $200,000 a three-year option to acquire 1,453,427 shares of the company’s common stock for $1.40 per share from Guy Quigley, ProPhase’s former chairman and CEO. Matrixx also acquired from Quigley a voting proxy to vote the shares subject to the option. ProPhase said it learned of Matrixx’s transactions with Quigley through Securities and Exchange Commission filing s.
