Graeme McRae, president and CEO of Bioniche Life Sciences Inc., at the firm’s animal vaccination production facility in Belleville, Ont., in March, 2012. Bioniche has reached a settlement with a group of dissident shareholders, ending a protracted proxy battle that was set to culminate in a standoff at the firm’s November annual meeting. The deal means that the board of directors will be peacefully revamped, and Mr. McRae will step down.Michelle Siu/The Globe and Mail
A nasty proxy battle at Canadian biotech company Bioniche Life Sciences Inc. has been averted after the company and its dissident shareholders reached a compromise.
Under the deal, the Bioniche board of directors will be peacefully revamped, and the founder and current chief executive officer Graeme McRae will step down. But Bioniche will also attempt to sell one of its key businesses – a strategy previously opposed by the dissidents.
The agreement says the two dissident shareholders – former Biovail Inc. CEO Bill Wells and his business partner Greg Gubitz – will now support the sale of Bioniche's animal health division, which generates most of the company's revenue and cash flow. It sells a wide range of products such as vaccines for horses and cattle, and health treatments for dogs and cats.
Mr. Wells and Mr. Gubitz had made opposition to that division's sale the core of their fight with Belleville, Ont.-based Bioniche, since they first complained to the company in April. The animal health arm is the only part of the organization that produces revenue and positive cash flow, they argued, while the rest of the business – which makes products related to human health – generates no revenue and shows no sign of a payoff. They had said it was crucial to the company's future to retain and expand the animal health business.
In an interview Wednesday, Mr. Wells said he is prevented from explaining the reversal of his position, because of the terms of the settlement with the company.
"We believe that this agreement is in the best interest of shareholders and is the right thing for the company going forward," he said. "It will be very clear to everybody that there has been major change at the company and that change is very good for shareholders."
Once the sale of the animal health division is complete, some of the proceeds will be distributed to shareholders, through share buybacks or dividends.
A new slate of directors will be nominated and presented to shareholders at the Bioniche annual meeting in early November, with only two of the current directors staying on the board. Mr. Gubitz will be one of the new directors, and several new independent directors will be named from a list of candidates agreed to by the company and the dissidents. The new CEO, whose selection is under way, will also be on the board.
Mr. Gubitz and Mr. Wells have also agreed to invest $250,000 in the company and to "cease their shareholder activism for two years," according to a company statement. They will be reimbursed for some of the money they spent on the proxy battle.
In a letter to shareholders, Mr. McRae said the new CEO will be appointed in the near future. When the new person is named, Mr. McRae will take on the job of chairman emeritus, and "focus on key projects without being involved in day-to-day operational management," he said.
Bioniche chairman James Rae said in a statement that the agreement with the dissidents will mean "an end to the distraction and expense associated with a protracted proxy dispute."