Eugene Melnyk just couldn't resist one last shot at Biovail Corp .
Biovail's founder, former chief executive officer and chairman, and until last year its biggest shareholder, is involved in an attempt to get U.S. regulators to examine the proposed merger of the Canadian pharmaceutical company with a California firm.
Shareholders of Biovail and Valeant Pharmaceutical International are to vote Monday on the $3.2-billion (U.S.) merger, which could close as early as Tuesday.
Two members of the California state legislature have written to the U.S. Securities and Exchange Commission and the U.S. department of Justice, asking that they investigate the deal because of the potential loss of jobs and tax revenue in California, and an alleged conflict of interest among financial advisers to the deal.
A source with knowledge of the situation said Mr. Melnyk provided the legislators with information about the deal, and they then decided to write the letters.
Mr. Melnyk has been a thorn in Biovail's side since he stepped down as chairman in 2007. In 2008 he staged a spirited proxy battle against the company, trying to get its board overthrown and new managers put in place. He lost that vote, but the following year he tried to nominate new directors and make other governance changes. He backed down again, but managed to get one of his nominees on the board.
In March of this year Mr. Melnyk sold off most of his holdings in Biovail, saying he was going to focus on his other businesses, which include several new pharmaceutical companies and the Ottawa Senators hockey team.
But the source said Mr. Melnyk, who still owns a few thousand Biovail shares, is upset about the merger with Valeant, and the potential loss of jobs at Biovail's Mississauga headquarters. He also does not like the multi-million-dollar severance payment Biovail's departing CEO Bill Wells will receive.
However, in the letters to the SEC and DOJ from California assembly members Kevin De Leon and Jared Huffman, the main concerns expressed are over job and tax losses to that state.
"With the new company being headquartered in Canada, the jobs that will be cut will be jobs in the United States," Mr. De Leon's letter says. "This alone is worthy of serious scrutiny from the SEC."
Both letters also complain that a new debt issue from the combined company will be financed by investment dealers who also provided fairness opinions on the transaction. "This seemingly brazen conflict of interest alone is worth an investigation," Mr. Huffman's letter says.
A staff member in Mr. Hoffman's office said the issue was "brought to our attention by a lobbying consulting firm that was hired by some of the shareholders." He did not know the names of the shareholders. A Valeant spokeswoman had no comment on the letters or Mr. Melnyk's involvement.