The acquisition of Scottsdale, Arizona based Zila, Inc. by Tolmar, Inc of Fort Collins, Colorado is being challenged by Intelident Solutions, Inc. which filed a complaint against Zila in the Delaware Court of Chancery. Tolmar, a pharmaceutical company focused on dental products and topicals, and Zila, a diagnostic company dedicated to the prevention, detection and treatment of oral cancer and periodontal disease, initially announced a definitive merger agreement on June 25, 2009. Under the agreement, Tolmar would purchase shares of Zila at $0.38 cash per share ($4M total), approximately an 18% premium over prior closing price. Tolmar had also negotiated the purchase of $12 million senior secured convertible debt for the discounted price of $5M in a note purchase agreement entered into between Tolmar and the note holders.
On July 1, Zola received an unsolicited offer from Intelident Solutions, Inc of Tampa, Florida for a cash price of $0.42 per share ($4.4M total). This unsolicited bid stated that Intelident, a dental technology company and a large customer of Zila, would have to negotiate with secured note holders and the purchase was contingent on coming to an agreement with the note holders on substantially similar terms as those in the Tolmar agreement. In order to enter into such an agreement, the note holders would have to terminate their agreement with Tolmar. The Board of Zila concluded that Intelident’s offer is not superior to its existing agreement with Tolmar, in large part due to the contingencies included.
Concerns about the objectivity of Zila’s Board have been raised. David Bethune, chairman and CEO of Zila, who participated in the Board’s vote, has a son, David Bethune Jr, who works as a business unit manager at Tolmar. Additionally, Dr. Steven Garrett, the vice president of clinical development at Tolmar, serves on the Board of Zila but was not allowed to vote on the Tolmar deal. The Zila Board has raised questions as to whether Intelident’s offer was made to prevent the Tolmar deal and allow Intelident to acquire Zila’s assets out of bankruptcy, a transaction in which shareholders would likely receive no consideration.
