Merck tenders for three series of Cubist convertibles following merger

By Toni Weeks

San Luis Obispo, Calif., Jan. 22 – Cubist Pharmaceuticals, Inc. announced the start of a tender offer for its 2.5% convertible senior notes due 2017, 1.125% convertible senior notes due 2018 and 1.875% convertible senior notes due 2020.

According to a filing with the Securities and Exchange Commission, the offer is being conducted in connection to the completion of the acquisition of Cubist by Merck & Co., Inc. On Jan. 21, Merck completed the tender offer for all Cubist common shares at $102.00 per share, consummated the merger of Cubist into Mavec Corp., Inc., a wholly owned subsidiary of Merck, and terminated trading of Cubist’s common stock (Nasdaq: CBST), each of which constituted a fundamental change, triggering Cubist’s obligation to begin the tender offers.

Holders of the company’s convertible notes have the right to require Cubist to repurchase for cash their notes, or any portion of the principal amount equal to $1,000 or an integral multiple of $1,000, at par plus accrued interest to the Feb. 23 fundamental change repurchase date.

The tender offer expires at 11:59 p.m. ET on Feb. 19. Tendered notes may be withdrawn at any time prior to the expiration time.

Holders may instead convert their notes at any time until Feb. 23 into the merger consideration that a holder would have been entitled to receive upon the consummation of the merger had each $1,000 principal amount of notes been converted into shares. As a result, the company’s conversion obligation to converted notes will be fixed at an amount in cash equal to the applicable conversion rates of 34.66199631 for the 2.5% notes, 13.17448859 for the 1.125% notes and 13.51652926 for the 1.875% notes, multiplied by the merger consideration of $102.00. Thus per $1,000 principal amount of notes, holders will receive in cash $3,535.52 for the 2.5% notes, $1,343.80 for the 1.125% notes and $1,378.69 for the 1.875% notes.

The paying agent and conversion agent is Bank of New York Mellon Trust Co., NA (315 414-3362 or ct_reorg_unit_inquiries@bnymellon.com). MacKenzie Partners, Inc. (212 929-5500 or 800 322-2885 or tenderoffer@mackenziepartners.com) is the information agent.

Cubist is a Lexington, Mass.-based biopharmaceutical company. Merck is a Kenilworth, N.J.-based health-care company.

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