Test maker tries again to win shareholder approval for a merger
Lab technicians work at the Chembio Diagnostics factory in Medford last year. Credit: James Carbone
The deadline for shareholders of Chembio Diagnostics Inc. to agree to its proposed merger with a French company has been extended for a third time, officials said.
The new deadline of 6 p.m. on April 26 was set after only 48.3% of the shares in Medford-based Chembio had been tendered for sale to Biosynex SA in France as of last Wednesday’s deadline. That represents an increase of nearly 10 percentage points since the earlier March 28 deadline passed, according to securities filings.
But more than 50% of the shares must be tendered to consummate the $17.2 million deal, which was announced on Jan. 31.
Biosynex has offered to pay 45 cents for every Chembio share. The stock has traded between 19 cents and $1.24 in the past year.
Investors' reluctance to endorse the transaction appears to be tied to the contention of at least five law firms, specializing in shareholder-rights litigation, that Biosynex isn't paying enough for Chembio.
"The question of whether [Chembio] was sold at a low price can only be assessed well after the merger," said Anoop Rai, a finance professor at Hofstra University's Frank G. Zarb School of Business.
"But since [Chembio shares] are trading at 45 cents, the market is betting that the 50% threshold is likely to be met. Overall, it looks to me like [the sale] will make it," he said.
The shares closed up 1 cent, or more than 2%, to 46 cents in Monday trading on the Nasdaq Stock Market.
Rai and others said the prolonged approval process is unusual.
Richard L. Eberly, the company's president and CEO, has sent two letters to shareholders that are filled with dire warnings.
In the April 10 letter, he wrote that if the merger fails, the company may have to breach "a financial covenant in its credit agreement related to debt maturing in September 2023 that could force the company to pursue a transaction or financing arrangement that is highly dilutive to existing stockholders or a bankruptcy or restructuring proceeding.”
Chembio, which manufactures rapid tests for HIV, syphilis, COVID-19, Ebola and other infectious diseases, reported a loss of $23.3 million last year on revenue of $49.5 million. The company last reported an annual profit — $500,000 — in 2013, according to the S&P Capital IQ database.
Chembio has struggled financially since mid-2020, when the U.S. Food & Drug Administration revoked an Emergency Use Authorization for a COVID-19 antibody test, saying inaccurate results were produced in some instances. The company had committed to converting all of its production to the COVID test.
Since then, the workforce has fallen to 188 employees from 337 in 2021, securities filings show.
Chembio’s largest shareholder is Perceptive Advisors LLC, a Manhattan-based investment firm, which owns 4.4 million shares, or 12% of the total outstanding shares. Until recently, the largest shareholder had been mutual fund giant Vanguard Group Inc., according to the S&P Capital IQ data.
James T. Madore writes about Long Island business news including the economy, development, and the relationship between government and business. He previously served as Albany bureau chief.
