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Northstar Neuroscience becomes takeover target

This article was originally published in The Gray Sheet

Executive Summary

Developer of theRenova cortical stimulation system hires investment banker Leerink Swann to assist in its evaluation of strategic alternatives after receiving an unsolicited takeover bid July 2 from investment fund Tang Capital Partners. Tang, which already owns 18% of Northstar, is offering $2.25 per share for the company, a 50% premium over its July 1 closing price. The offer values Northstar at about $59 million, based on the firm's roughly 26 million shares outstanding. The proposal will expire if Tang does not receive a "positive response" by July 9 and enter into a definitive merger agreement by July 23. Tang says it has tried to work with Northstar management to find "strategic alternatives," but "so far management has been unwilling to entertain such discussions" under acceptable conditions. Northstar's stock plunged from $8.36 to $1.37 on Jan. 22, when the firm announced that its 174-patient EVEREST trial of Renova for improving hand and arm function following a stroke missed its primary efficacy endpoint. The company is also developing Renova for depression (1"The Gray Sheet" June 23, 2008, p. 20)
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