The market might not yet be totally convinced about the worth of Galen's €330 million (£260 million) takeover of Warner Chilcott - junk bond debt etc - but, if the deal goes through as it is currently structured, it will at least free up a good portion of the equity and reduce the pitifully small Galen free float where directors hold more than half the equity.
Founder and newly-appointed Galen president Allen McClay will see his stake fall from 31 per cent to 23 per cent under the terms of the deal but there is an argument that Dr McClay should free up more of the equity to provide liquidity for the shares when they join Nasdaq.
Dr McClay and indeed chairman John King who owns 17 per cent of the merged group could gradually reduce their stakes. Unless they do, US investors may steer clear of a share they may consider to be too tightly-held for them to be able to buy and sell in decent size.
While the deal is waiting to go through, investors with steely nerves have an opportunity to play off Warner Chilcott's dollar-denominated stock against Galen's sterling shares.
As Current Account was penning this, Warner Chilcott shares were trading at just under $19. Galen's offer to swap 2.5 of its own shares for each Warner Chilcott share, thus values Galen shares at $7.44 or £4.93 sterling. At the same time, Galen was trading at £5.30 in London. A cheap way into Galen?
