Akorn, Inc., non-debtor WorldAkorn Pharma Mauritius, and non-Debtor Akorn India Private Limited (“AIPL”) ask the U.S. Bankruptcy Court for the District of Delaware to authorize (i) the sale of 100% equity interests in AIPL to Biological E. Limited for $10 million in cash, subject to withholding taxes, if any, and adjustment for certain net working capital items and (ii) the retention of PricewaterhouseCoopers Corporate Finance, LLC (“PwC CF”) in connection therewith.
AIPL is an Indian private limited company with a manufacturing facility for sterile injectable products for use in the pharmaceutical industry. AIPL has 4,852,377 equity securities issued and outstanding, of which Akorn owns just 1,000 (or 0.02%). Akorn Mauritius owns the remaining 4,851,377 (or 99.98%) of the equity securities in AIPL.
Prior to the commencement of these chapter 11 cases, Akorn determined that AIPL’s operations were no longer part of its core, go-forward business strategy. To facilitate the exit of its investment in AIPL’s operations, Akorn, with the assistance of PwC CF, launched a process to market AIPL’s operations for potential sale to third parties.
This led to hard-fought, arms’-length negotiations with multiple bidders, ultimately culminating in an agreement to convey the Interests to the Purchaser in exchange for $10 million in cash, subject to withholding taxes, if any, and adjustment for certain net working capital items, as specified in the Share Purchase Agreement. The terms and conditions of the sale are set forth in the Share Purchase Agreement, and Akorn now, in an exercise of its sound business judgment, asks to perform all obligations under the Share Purchase Agreement, including the disposition of its 0.02% of AIPL Interests.
The Debtors believe that it is beneficial to their reorganization to consummate the Sale Transaction as expeditiously as possible to minimize any further costs to the estate associated with its continued investment in AIPL’s operations.
Following its decision to divest its AIPL operations, Akorn determined that a private sale following a competitive marketing process would be the most efficient and effective method by which to sell AIPL’s operations. To run the private sale, the Debtors retained PwC CF as financial advisor pursuant to engagement letter dated as of the April 25, 2019.
Pursuant to the Engagement Letter, PwC CF is entitled to a $250,000 advisory fee and a success fee. The Advisory Fee is paid in two parts — $150,000 upon signing of the Engagement Letter, which has been paid, and $100,000 upon the signing of the Share Purchase Agreement, which is yet to be paid. The Success Fee is owed upon the closing of the Sale and is the greater of $700,000 or 2% of the Purchase Consideration. Through the motion, the Debtors asks approval of PwC CF’s retention in connection with the Sale Transaction.
Pursuant to the terms and conditions of the Share Purchase Agreement, and subject to Court approval, Akorn will sell all Interests in AIPL to the Purchaser free and clear of all Liens in exchange for the Purchase Consideration.
The salient terms and conditions of the Share Purchase Agreement are:
a. Sellers: Akorn and Akorn Mauritius
b. Purchaser: Biological E. Limited
c. Acquired Assets: 100% of the Interests of AIPL
d. Purchase Consideration: $10 million
e. Sale: The sale of the Interests of AIPL does not contemplate an auction.
f. Closing and Other Deadlines: The Closing of the transaction will take place at the registered office of AIPL or at such other place as may be mutually agreed by the Parties within seven Business Days from the date on which the CP Satisfaction Notice is received by the Purchaser.
g. Use of Proceeds: The proceeds from the Sale Transaction are expected to be used in accordance with Section 5.20 of that certain Senior Secured Super-Priority Term Loan Debtor-In-Possession Loan Agreement, dated as of May 2020, by and among the Debtors, the lenders party thereto, and Wilmington Savings Fund Society, FSB.
h. Credit Bid: None
i. Relief from Bankruptcy Rule 6004(h): The Debtors have requested a waiver of the 14-day stay under Bankruptcy Rule 6004(h) to the extent necessary to permit the sale to close within seven Business Days from the date on which the CP Satisfaction Notice is received by the Purchaser.
A copy of the Agreement is available at https://tinyurl.com/yc4smab9 from PacerMonitor.com free of charge.
About Akorn, Inc.
Akorn, Inc., together with its Debtor and non-Debtor subsidiaries, is a specialty pharmaceutical company that develops, manufactures, and markets generic and branded prescription pharmaceuticals, branded as well as private-label over-the-counter consumer health products, and animal health pharmaceuticals. Akorn is headquartered in Lake Forest, Illinois, and maintains a global manufacturing presence, with pharmaceutical manufacturing facilities located in Illinois, New Jersey, New York, Switzerland, and India.
Akorn, Inc. sought Chapter 11 protection, as the Lead Debtor, together with its 16 affiliates: (i) 10 Edison Street LLC (Bankr. D. Del. Case No. 20-11178); (ii) 13 Edison Street LLC (Bankr. D. Del. Case No. 20-11180); (iii) Advanced Vision Research, Inc. (Bankr. D. Del. Case No. 20-11182); (iv) Akorn (New Jersey), Inc. (Bankr. D. Del. Case No. 20-11183); (v) Akorn Animal Health, Inc. (Bankr. D. Del. Case No. 20-11185); (vi) Akorn Ophthalmics, Inc. (Bankr. D. Del. Case No. 20-11186); (vii) Akorn Sales, Inc.(Bankr. D. Del. Case No. 20-11174); (viii) Clover Pharmaceuticals Corp. (Bankr. D. Del. Case No. 20-11187); (ix) Covenant Pharma, Inc. (Bankr. D. Del. Case No. 20-11188); (x) Hi-Tech Pharmacal Co., Inc. (Bankr. D. Del. Case No. 20-11189); (xi) Inspire Pharmaceuticals, Inc. ((Bankr. D. Del. Case No. 20-11190); (xii) Oak Pharmaceuticals, Inc. (Bankr. D. Del. Case No. 20-11192); (xiii) Olta Pharmaceuticals Corp. ((Bankr. D. Del. Case No. 20-11191); (xiv) VersaPharm Incorporated (Bankr. D. Del. Case No. 20-11194); (xv) VPI Holdings Corp. (Bankr. D. Del. Case No. 20-11193); and (xvi) VPI Holdings Sub, LLC (Bankr. D. Del. Case No. 20-11195), on May 20, 2020. The cases asre assigned to Judge John T. Dorsey.
In the petitions signed by Joseph Bonaccorsi, authorized signatory, the Debtors disclosed total assets of $1,032,275,000, and total debt of $1,051,769,000 as of March 31, 2020.
The Debtors tapped Patrick J. Nash, Jr., P.C., Gregory F. Pesce, Esq., Christopher M. Hayes, Esq., Nicole L. Greenblatt, P.C., at Kirkland & Ellis LLP and Kirkland & Ellis International LLP as their general bankruptcy counsel. The Debtors tapped Paul N. Heath, Esq., Amanda R. Steele, Esq., Zachary I. Shapiro, and Esq., Brett M. Haywood, Esq., at Ricahrds, Layton & Finger, P.A. as their General Bankruptcy Counsel.
AlixPartners, LLP serves as the Debtors’ Restructuring Advisor, PJT Partners LP as their Financial Advisor and Investment Banker, Grant Thornton LP as their Tax Advisor, and Kurtzman Carson Consultants, LLC as their Notice and Claims Agent.