NEW YORK, Aug. 25 /PRNewswire/ -- Ramius Value and
Opportunity Advisors LLC, a subsidiary of Ramius LLC (collectively,
"Ramius"), today announced that it delivered a letter to
Daniel H. Petree, the newly
appointed lead independent director of Cypress Bioscience, Inc.
("Cypress" or "the Company") (Nasdaq: CYPB). In the letter,
Ramius expressed concern regarding former lead independent director
Jean-Pierre Millon's abrupt
resignation last week from the Board citing "a difference of
opinion with respect to the timing of the execution of [Cypress']
strategy." In the letter, Ramius also requested an
in-person meeting with any or all of the continuing independent
members of the Board. Finally, Ramius confirmed its
commitment to pursuing an acquisition of Cypress and repeated its
willingness to consider raising the value of its acquisition
proposal in the event Ramius is granted limited due diligence and
the Company agrees to negotiate in good faith.
Ramius Partner Managing Director Jeffrey
C. Smith stated, "The very fact that Mr. Millon felt
compelled to resign from the Board calls into serious question this
Board's lack of true independence and balance. It seems clear to us
that a director expressing a differing view was forced to
relinquish his leadership role on the Board and subsequently chose
to resign from the Board. At best, this demonstrates an
unhealthy board environment. At worst, it is symptomatic of a
truly dysfunctional board that continues to act without regard to
the best interests of shareholders."
Mr. Smith went on to say, "We stand ready, willing, and able to
consummate a transaction and hope that the Board will uphold its
fiduciary responsibility to engage with us regarding our
proposal."
The full text of the letter follows:
Dear Daniel:
Ramius Value and Opportunity Advisors LLC, together with its
affiliates (collectively, "Ramius"), has reviewed the letter sent
by Cypress Bioscience Inc. ("Cypress" or the "Company") on
August 17, 2010. As the newly
appointed lead independent director, we have recently attempted to
reach out to you directly to start a dialogue. Unfortunately,
to date we have yet to receive any response.
The Board Continues to Reject Our Efforts to Engage in
Negotiations While Ignoring Our Willingness to Increase our
Acquisition Proposal
In your letter dated August 17,
2010, the Company, in trying to justify its refusal to enter
into negotiations with us, states only its belief that we have not
made any substantive change to our offer. What the Company
conveniently fails to acknowledge is our willingness to increase
the value of our acquisition proposal if we are granted due
diligence and the Company commits to either negotiating a
transaction with us or commencing an auction process for the sale
of the Company.
It's ironic, indeed, that the Company appears now to be
concerned that shareholders receive full and fair value for their
shares while for the past several years this Board has overseen
massive destruction of shareholder value. Every day that goes
by under management's current ill-advised strategy jeopardizes the
chance that shareholders will ever have the opportunity to receive
full and fair value for their shares.
That you continue to rebuff our overtures to engage in
meaningful discussions around our offer while continuing to be so
quick to approve highly speculative, overpriced, and
value-destroying acquisitions only serves to reinforce our belief
that this Board has completely disregarded the best interests of
shareholders and its fiduciary duties.
Perhaps Jean-Pierre Millon, the
former lead independent director, recognized this before abruptly
resigning from the Board last week.
The Resignation of Lead Independent Director Jean-Pierre Millon is Disturbing and Emblematic
of a Much Maligned Board of Directors
After speaking with Jean-Pierre
Millon on several occasions, we were dismayed to learn that
after five years of service, the position of lead independent
director was suddenly being "rotated" away from Mr. Millon.
At first, we could not understand why such an unexpected
change would be made while we were attempting to open a
constructive dialogue. However, it became clear the following
day when the Company made an 8-K filing with the Securities and
Exchange Commission disclosing that Mr. Millon had resigned from
the Board of Directors (the "Board") citing "a difference of
opinion with respect to the timing of the execution of [Cypress']
strategy."
According to this year's proxy, the Board appointed
Mr. Millon as the lead independent director in April 2005 to help reinforce the independence of
the Board as a whole and to serve as an effective balance to a
combined Chief Executive Officer/Chairman. The very fact that
Mr. Millon felt compelled to resign from the Board calls into
serious question this Board's lack of true independence and
balance.
Based on our experience of engaging with board members from over
40 public companies over the past eight years, an effective board
requires directors who are willing to engage in spirited debate and
who may disagree from time to time regarding corporate strategy or
decision making. It seems clear to us that a director
expressing a differing view was forced to relinquish his leadership
role on the Board and subsequently chose to resign from the Board.
At best, this demonstrates an unhealthy board environment.
At worst, it is symptomatic of a truly dysfunctional board
that continues to act without regard to the best interests of
shareholders.
We find the decision to name you as the new lead independent
director equally disconcerting. We believe this decision
further concentrates control of Cypress with two individuals,
Jay Kranzler and you. As we
have noted in prior correspondence, you are already the sole member
of the Finance Committee, giving you the sole authority to
evaluate, review, facilitate and approve the selection and
engagement of financial advisors in connection with strategic
transactions, licenses, joint ventures, acquisitions and other
similar transactions. Additionally, you and Dr. Kranzler, the
CEO of Cypress, are the only two members of the Strategic
Committee, which meets with and advises management as the Company
considers product licensing, potential acquisitions and other
strategic opportunities.
Now, in the midst of an acquisition proposal, when it is most
important for the Board to act independently of management, the
Board gave you the added responsibility of lead independent
director. In our opinion, this shows bad judgment on the part
of the entire Board and concentrates power and decision making with
just two members of a seven person board.
Our Acquisition Proposal Represents a Much Better
Alternative for Maximizing Shareholder Value than the Company's
Ill-Conceived and Destructive Strategy
In your letter dated August 17,
2010, the Company states that "[Ramius'] proposed
purchase price may represent a premium to a given day's closing
stock price, but [the Board's] focus is on the value of the
Company's current business and future prospects." The
fact remains that our offer provides shareholders with a
substantial premium for their shares and protects them from the
very real value-destroying actions taken by this Board and
management team. The dismissive tone and apparent detachment
from reality force us to remind the Board that it has overseen the
destruction of a massive amount of shareholder value, even when
looking as far back as 1995 when Dr. Kranzler was first named CEO.
The stock price of Cypress has declined dramatically over almost
any extended period of time. Dr. Kranzler's biography on the
Company's corporate website states that, since he was appointed CEO
in December 1995, "Cypress has
successfully raised $226 million in
new funding..." Compare this to the average market
capitalization of the Company for the month prior to our
acquisition proposal of under $100
million. The Board of Cypress, in its many different
forms, has failed to create value for shareholders in more than 25
years as a public company. Unfortunately, in the absence of
our offer, Cypress shareholders would have no reason to expect
anything different in the future.
The letter further states that, "[The Board has] believed for
some time that the market has seriously undervalued Cypress and
[Ramius'] interest in acquiring the Company has confirmed our long
held belief." We believe it is disingenuous for the Board
to make statements like this when no director has purchased a
single share of Cypress stock since 2007. Instead, the Board
has continued to collect substantial cash payments and options
grants over the years without reinvesting a penny of the proceeds
in Cypress shares. As of this year's proxy, the current
officers and directors of Cypress owned outright common shares
representing approximately 1.25% of the shares outstanding.
This represents a current market value of less than
$1.8 million, or an average of
$177,362 per officer and director.
This pales in comparison to the egregious compensation paid
to management and the Board while shareholders have suffered from
the Company's horrific performance.
Finally, you state, "Our Board and management team remain
committed to building long term stockholder value, and we believe
that our current strategy of developing a portfolio of CNS drug
candidates will deliver superior value to Cypress
stockholders." Wake up! Your shareholders, the true
owners of the Company, do not support this strategy and have no
confidence in your ability to deliver value. Just look at the
reaction to the acquisition of BL-1020 from Bioline. The
stock fell 38% in one day, destroying $63
million in shareholder value. The stock continued to
drop throughout the remainder of June and into July and remained
more than 40% below the pre-Bioline deal stock price prior to the
announcement of our acquisition proposal on July 19th.
This acquisition follows the disastrous acquisition of Proprius
in 2008 which yielded substantial losses for shareholders.
Management has now belatedly acknowledged that the
acquisition of Proprius has failed. How many more
value-destroying transactions will this Board approve?
Prior to the abrupt resignation of Mr. Millon, we felt that, at
a minimum, we could have a dialogue with the lead independent
director. Despite a total lack of response from you to date,
we hope and expect that we can continue this dialogue with you.
We had requested an in-person meeting with Mr. Millon and
were awaiting a response at the time of his resignation. We
would now like to re-direct this request to you for an in-person
meeting with any or all of the continuing independent members of
the Board.
We once again confirm our commitment to pursuing an acquisition
of Cypress. We implore the Board to take no further
value-destroying actions or approve any further acquisitions.
We have repeatedly expressed our willingness to consider
raising the value of our acquisition proposal in the event we are
granted limited due diligence and the Company agrees to negotiate
in good faith. We stand ready, willing, and able to
consummate a transaction and hope that the Board will uphold its
fiduciary responsibility to engage with us regarding our
proposal.
Best Regards,
Jeffrey C. Smith
Partner Managing Director
Ramius LLC
About Ramius LLC
Ramius LLC is a registered investment advisor that manages
assets in a variety of alternative investment strategies. Ramius
LLC is headquartered in New York
with offices located in London,
Luxembourg, Tokyo, Hong
Kong and Munich.
Contact:
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Media: Sard Verbinnen &
Co
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Dan Gagnier,
212-687-8080
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or
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Investors:
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Ramius LLC
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Peter Feld,
212-201-4878
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Gavin Molinelli,
212-201-4828
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SOURCE Ramius LLC
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