The all-important plan to restructure Ascendis Health’s smothering debt load of around R7-billion — the success of which will help the company avoid a business rescue process and fire sale of its assets — has hit another obstacle.

As Ascendis shareholders consider a board and management-backed recapitalisation plan, which is led by the company’s creditors and seeks to reduce the debt load, another competing plan from a US-based investor has been tabled. 

The parties behind both competing plans seek to take over Ascendis, the once high-flying pharmaceuticals and healthcare group that has seen its share price tumble to around 60 cents from close to R30 in September 2016. Ascendis’s financial position is so dire that it is shelling out the bulk of its profits just to service debt payments. 

Ascendis said a competing plan by an unnamed US-based firm was shared widely on social media, mainly Twitter, which prompted the company’s management and board to clarify its position. 

The distribution of the plan on Twitter might also raise concerns about insider trading and market manipulation, as in recent days the Ascendis share price has increased by 16% to a two-month high of 62 cents. In other words, some Ascendis shareholders might have taken positions on its shares knowing in advance that another potential restructuring plan or offer for the company would be tabled. 

But the Ascendis board doesn’t think much about the plan tabled by the US-based firm, saying it “did not constitute a firm intention” to take over the company. 

The firm has offered to buy 100% of Ascendis shares via the issue of its own preferred shares at a purchase price of R1.50 per share — almost three times the company’s current share price. The investor also plans to separately invest $20-million (R284.7-million) into Ascendis to bring additional working capital for its growth and stability. But before investing the money, the US-based company wants to reach an agreement with Ascendis lenders to reduce debt in the company — following its recapitalisation — from €15-million (R253-million) to €5-million (R84.4-million).

The tabling of the ‘offer’

Ascendis said it first became aware of the offer on 19 August when the US-based firm informed it via an “unsolicited telephone call” that it planned to take control of Ascendis. By 20 August, the firm informed Ascendis that it planned to formally provide more information to the company’s board and management regarding its offer. Only by 25 August, Ascendis received a “non-binding indicative expression of interest”, which the company said still didn’t constitute a firm offer.

At this point, Ascendis didn’t see a need to inform shareholders or the JSE about the firm’s intention. But a group of activist shareholders, called Ascendis Activist Investors (AAI), raised alarm about the potential (and material) transaction, asking Ascendis on 2 September to inform shareholders and JSE about it. 

Ascendis said on 3 September it became aware that a group called Retail Activist Investors, which the company believes is the new name for AAI, disclosed on Twitter that it has been approached by a large US-based private equity firm to acquire all shares in Ascendis. Retail Activist Investors also questioned why Ascendis didn’t inform the JSE about the offer. 

But Ascendis still believes that the US-based private equity firm hasn’t tabled a firm offer, only stating its intention to do so. The firm also didn’t provide information on what its governance arrangements will be after buying Ascendis or what its strategy for the company is, said Ascendis. 

One firm deal on the table 

As far as Ascendis is concerned, there is only one restructuring and recapitalisation plan — it is led by a consortium of the company’s lenders, Blantyre Capital and L1 Health. 

The consortium of lenders took on more than a third of Ascendis’ debt by late January 2021 and increased its holding to more than 75% just a week later. Under the proposed transaction, the lenders will exchange their debt interests for Ascendis’ European subsidiaries, Remedica and Sun Wave Pharma, as well as the company’s 49% shareholding in Farmalider. 

They will also receive the net proceeds from the disposals of South African subsidiaries Animal Health, Biosciences and Respiratory Care Africa (RCA). Ascendis will retain its three divisions in South Africa, namely Medical Devices (excluding RCA), Consumer Brands and Pharma. The Ascendis board said it believes that the recapitalisation plan by the consortium of lenders, which shareholders are set to cast their vote on in October, is the best outcome for the company’s restructuring efforts.

But the recapitalisation will come at a significant cost to Ascendis as it will spend about R258-million on fees to legal advisers — a fee close to the company’s market capitalisation of R274-million. DM/BM