Lost in the holiday shuffle: mergers, spin-offs, settlements

New Hampshire Business Review, Jan 18, 2008 by Sanders, Bob

The end of the year is often the time when companies go through major transitions or disclose in lengthy filings information that perhaps they hope to see lost amid the discarded wrapping paper. New Hampshire Business Review went through some of these filings. Here is some of what you may have missed over the holidays.

Ocean Bank has a new owner

Remember Chittenden Corp., the Vermont-based parent company of Portsmouth-based Ocean Bank, which a few months ago bought up Wolfeboro-based Community Bank and Trust? Well, Connecticut's People's United Bank bought Chittenden for $1.8 billion in a deal that closed on New Year's Day. Ocean, according to the latest filing, will still retain its own identity, and Danny O'Brien will continue as Ocean's president.

The employment contract of Chittenden'schief executive, Paul Perrault, was terminated, but he ended up cashing in nearly $10 million in options. His severance payoff has yet to be disclosed.

Chittenden stockholders received $35.636 a share in cash or equivalent in stock, totaling about $1 billion in cash and $770 million in stock.

For those who keep track of such things, here is the breakdown: Stockholders who held 40 percent of Chittenden shares elected to take the cash and got their wish. Shareholders owning some 13 percent who didn't state a preference also received cash. That leaves shareholders holding a little less than half of the stock getting paid mostly (92.3 percent to be exact) in stock, reaping cash for the rest of their shares.

Former Chittenden executives and board members also cashed in their stock options as part of the merger, reaping some $25.5 million in options. (They also traded in their Chittenden stock for either cash or People's stock to the tune of $19.5 million.)

O'Brien received $2.3 million for his options. Perrault netted $9.92 million, followed by Kirk Walters, chief financial office, with $3.1 million; John Barnes, executive vice president, $3 million, and John Kell', chief banking officer, $2.5 million. The seven board members, who recommended the deal to the shareholders, cashed in their options for $1.1 million.

Bentley spin-off details revealed

Bentley Pharmaceutical shareholders won't get to vote on whether to spin off the company's alternative drug delivery business, but they could learn more about the plan, if they take the time to plow through a 67,000-word filing sat that was submitted two days after Christmas.

For years, Bentley's generic drug business has subsidized the alternative drug delivery business, which has been striving to hit the jackpot by developing a nasal spray for insulin for the estimated 21 million diabetics in the United States alone - a market that is expected to double thanks to aging, obesity and poor health habits (in the optimistic wording of the filing).

CPEX Pharmaceuticals, as the new company would be called (and to be tickered CPEX on the Nasdaq exchange), would employ 20 people in the company's Exeter office, and would have to stand on its own, after one last $10 million infusion of cash from Bentley (in return for preferred stock, which the company plans to sell to a third party).

So far the financial track record of the business has been dubious, losing some $16.6 million over the past six years, with a $4 million loss in last three quarters of 2007, as research and development costs climb. The new company is counting on using CPE-215, a food additive and fragrance that can be used to deliver the drug through membranes.

Thus far, Bentley has used it to develop the Testim testosterone gel marketed by Auxilium Pharmaceuticals, to treat older men with hormone deficiencies, which - the company predicts - will result in another growing market. However, Testim royalties hasn't been able to keep up with the company's expenses, resulting in annual losses.

All that could change, if Nasulin, the insulin nasal spray, takes hold. The product is now undergoing testing in India, the United States and Ireland. But whether the spray can be approved, marketed, partnered and beat out various competitors remains to be seen, as the filing's enumeration of risks makes clear. Don't expect any dividends in the near future, the company warns.

Bentley shareholders won't have much choice in the matter. Sometime this year - if the spin off goes as planned - they will get one share of CPEX for every 10 shares of Bentley stock they own with fractional shares being paid out in cash. Since there are more than 22 million Bentley shares outstanding, there should be about 2.2 million CPEX shares to be traded on the Nasdaq. The filing does not give any estimate of how much they would fetch.

The CPEX board will be chaired by current Bentley chair James R. Murphy, and its CEO will be John Sedor, Bentley's president for the past two years. Robert Herbert, Bentley's assistant treasurer and director of SEC reporting, would be the CFO, and Bentley vice chair Michael McGovern would be a director. The four would own about a fifth of the company. Their compensation has not yet been disclosed.