Part 3 - A Brief History of CryoLife’s Hostile Takeover Attempt
This past January 13, 2010, CryoLife CEO Steve Anderson, told Medafor’s board that his company had bought 1.6 million Medafor shares, amounting to 8% of the company. Anderson also sent a letter to Medafor’s board of directors offering $2 per share in cash and stock for the remaining 92%. That unsolicited offer was the third one from CryoLife to Medafor. The first one came last November and it had no price attached to it. CryoLife, at the time, was one of Medafor’s distributors for its MPH hemostat. MPH is a micro porous polysaccharide hemostatic powder which stops bleeding in virtually any surgery. It is CE Mark approved (since 2003) and has an FDA pre-market approval (since 2006). The product works. When applied to the surgical site, it rapidly dehydrates blood and accelerates the clotting cascade. It’s easy to use, doesn’t promote infection and is absorbed within 24-48 hours. Other surgical hemostats can take three to eight weeks to fully break down. MPH is cheap and generates very good gross profit margins for whatever company is selling it. Medafor said, in effect, thanks but no thanks to CryoLife’s first purchase offer. Two months after that, CryoLife tried again. This time CryoLife CEO Anderson put a price on his offer—$25 million in CryoLife stock—which trades on the New York Stock Exchange under the symbol “CRY.” Medafor’s answer was, again, “No.” This time Medafor CEO Gary Shope gave a reason—CryoLife’s $25 million price tag for Medafor was less than the $40 million value of the supply contract. Medafor was simply not available at such an obviously low price. But, of course, CryoLife CEO Anderson has a long and well documented record of employing brute force tactics. Two months after Medafor’s second “no”, Anderson sued Medafor in U.S. District Court for the Northern District of Georgia alleging breach of contract, fraud, negligent misrepresentations and violations of the Georgia RICO racketeering statutes. The District Court judge granted Medafor’s motion to dismiss on December 9th and in the process characterized CryoLife’s lawsuit as a “shotgun pleading.” Days later Medafor gave CryoLife a notice of intent to terminate the existing supply agreement by January 18, 2010. And those events set the stage for CryoLife and its CEO Steve Anderson’s current attempt to take over the 11-year-old, St. Paul, Minnesota-based Medafor.