Okay, thanks for the inform.
But then, it still seems that $180,000 is a small sum to be paid to take a company of the market. When a company allows it to become public that it is a target of a "friendly" acquisition, it is the one taking all the risk. Perrigo only risked $180,000. A company's risk is the withdrawal of the suitor and the market's response (interpretation, speculation, etc.) to that. The only reason that I can think of why the option price was so low is that LCI did not think Perrigo would walk. But even that doesn't make sense.
The deal was the $14.56 plus contingent consideration The contingent consideration is an aditional price to be paid. That part was negotiable, I believe. I don't think the contingent consideration was fixed.
The option had a minimum price, not a fixed price. Providing a minimum price is not the same as a fixed price. It only provides a bottom. But the price is still negotiable.
I believe that Farber and the board have a fiducicary duty to the minority shareholders to get them as good or better deal.
The option did have a fixed price. It was $14.56 a share plus contingent additional considerations.
The option was between Bill Farber and PRGO, not between LCI and PRGO.
LCI was not going to negotiate for the minority shareholders. The special committee from the Board would EVALUATE the offer made by PRGO. Here's a quote from the last PR from LCI on the deal:
The Special Committee was created to look after the best interests of the shareholders of the Company, and to evaluate any offer made to Lannett's independent shareholders by Perrigo to acquire such shares.
An option without a fixed price is almost meaningless. All it does is provide a fixed period of time in which to negotiate the price while another potential buyer cannot. Since the price was never fixed (only a bottom), everything was still up for negotiation. Either side could walk away. LCI could walk by asking more than the buyer would pay.
In any case, I believe that $180,000 is far too little to pay to lock up a company such as LCI for months. It almost seems ludicrous that the option price was so low. A company such as LCI should have asked for and should have received more than that. It is almost giving a way an option. Options are valuable.
If PRGO exercises the option, of course Farber has to sell his shares. That is the purpose of an option: it gives the holder of the option the right to buy the stock at the agreed upon price.
The issue that will make PRGO not exercise the option is the extra 4 million shares, like they said. Because PRGO said they would buy the remaining shares for at least $17.84, the buyout price increased by over $70 million. You have to remember, the potential of the AB rating was known by PRGO from the beginning. I'm sure they took that into account when they agreed to offer at least $17.84.