Hazards of growth-by-M&A: Debt-laden Concordia tosses CEO, washes out investors in refi plan

Concordia shares fell deeper into penny-stock territory on Friday after the company announced a refinancing deal. (bfishadow on Flickr. License: https://bit.ly/1ryPA8o)

Troubled Concordia, the Canadian drugmaker often compared to fellow price hiker Valeant, said on Thursday it had made a deal with creditors, replaced its CEO, and all but wiped out shareholders. That’s quite an upheaval, and it has one aim: financing. 

The pharma company inked a deal with the bulk of its creditors to raise capital of $586 million in a private placement, gain $1.4 billion of new debt, and rework its debt load to reduce it to $2.4 billion. 

Concordia will save about $171 million on interest because of the refi. With a new stash of funding and those savings, the company will be set up to pay its bills—and employees—for now and benefit shareholders long-term, Concordia said in a statement. 

Sept. 15-17,2020

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Thing is, those shareholders won’t be Concordia’s current investors—not in any meaningful way, that is. They’ll get one share for every 300 shares they own, and after the refinancing will own just 0.35% of the company. The debtholders will end up owning almost 100%. 

RELATED: Concordia catches antitrust scrutiny over 5,700% price rise for thyroid drug

Employees will lose stock options, and their shares will be treated the same way as everyone else’s, meaning they’ll be diluted down to practically nothing. 

That's not a huge loss at today's prices, though. Concordia's Nasdaq shares fell deeper into penny-stock territory—26 cents—on Friday, down from a high point of $84.17 in September 2015. That's more than a 99% decrease in value in a few short years.

RELATED: Price-hiking Concordia CEO heads for the exit, drawing parallels with Valeant

Also losing out in the restructuring is CEO Allan Oberman, who’s stepping aside. Graeme Duncan, president of Concordia International, will take the top chair as interim CEO rather than leaving the company at the end of June as he’d previously planned. Chief Corporate Development Officer Sarwar Islam is leaving immediately, too. 

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