Biovail founder plans court challenge of vote against changes
Biovail 3-month TSX chart
The shareholder vote Wednesday that rejected Biovail Corp. founder Eugene Melnyk's plan to replace the board of the pharmaceutical company will be the subject of a court battle.
Melnyk said he will challenge the vote because it was illegal. He alleged in a news release that the company changed quorum rules to scupper his challenge.
A court will hear the case on July 8, Melnyk said.
Meeting chair and lawyer Jonathan Levin also said after the contentious meeting that the company would seek court approval for the vote.
Levin said 97.6 per cent of the votes cast backed the management slate, but that was after Melnyk's supporters withdrew their proxies.
Melnyk's release alleged company officials "knew that without my shares, they would not have a quorum to hold the meeting and so they secretly met early this morning to change the rules."
That violated the law and an agreement the two sides had negotiated to govern the meeting, he said.
But CEO Bill Wells said Melnyk simply didn't want to accept the will of the other shareholders.
Melnyk backers pull votesMelnyk backers also said that the company's shareholder meeting was invalid because it lacked a quorum after they withdrew their votes, leaving less than 51 per cent of the shares outstanding represented.
Melnyk's representatives, led by lawyer William Braithwaite, left the meeting after the directors passed a bylaw saying that only 25 per cent of the stock was needed for a quorum.
Under his plan for a new board, Melnyk proposed the appointment of Bruce Brydon as CEO. Brydon previously held that post from 1995 to 2001.
Melnyk had said he was unhappy with the direction and management of the company, in which he retains an 12 per cent stake.
In May, Biovail announced major changes to its business, including the closure of two offshore production facilities and a shift in its research focus.
The dissidents said the company's plan to spend $600 million on "an ill-conceived R&D strategy" while also buying back shares could threaten Biovail's annual $1.50 a share dividend.
After the meeting, Melnyk told reporters that he would start a new company, Trimel Pharmaceuticals, if Biovail doesn't change direction. Brydon would be Trimel CEO, Melnyk said.
Biovail stock was up two cents to $10.82 in afternoon trading on the TSX. The 52-week range is $10.30 to $27.68.
With files from the Canadian Press
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