promega shareholders1

Promega shareholders met at a Fitchburg hotel last November to hear dissident investors Ted Kellner and Nathan Brand explain their plan to buy the company. On Wednesday, Kellner and Brand filed suit against Promega and CEO Bill Linton, claiming "shareholder oppression."

The battle over control of Promega Corp., one of the Madison area’s premier biotechnology companies, escalated Friday as shareholders gathered for two meetings, called by opposing sides, to hash out the conflict.

At least 80 shareholders convened at Wyndham Garden Hotel in Fitchburg and 50 more listened by phone as dissident stockholders Ted Kellner, of Milwaukee, and Nathan Brand, of Miami, laid out their concerns to fellow investors.

Kellner and Brand have offered to buy the privately owned Promega for $625 a share, two and a half times the price Promega founder, chairman and CEO Bill Linton offered, of $233 to $272 a share, in a buy-back process called a Dutch Auction in May 2014.

Kellner said Linton had approached several large share-owners over the past year and asked them to sell some or all of their stock to him or present their holdings as a gift to Usona Institute, a nonprofit Linton set up in July 2014.

Usona describes itself, on its website, as a medical research organization whose goal is “to help people with a life-threatening cancer diagnosis lift their anxiety and depression with the therapeutic, guided use of entheogens,” or psychedelic drugs.

“Bill’s intent was clearly to transfer Promega to Usona. That was the game plan,” Kellner said.

Madison businessman Fred Mohs, a longtime shareholder, told fellow investors Linton met with him and “encouraged me to give all my shares to Usona.”

In a separate interview with the State Journal, Mohs said Linton came to his office and told him, “If we can get these drugs developed, it will be a wonderful thing.”

“He’s a very creative guy who built this great company with his passion and drive and focus, and has now become focused on Usona,” Mohs told the meeting.

Kellner said he and Brand decided in March they were both concerned enough about the direction of the company to work together to get some answers.

The pair sent numerous letters, starting in May, to meet with Linton and the board of directors to find out why one longtime board member resigned and two others were not reappointed in July 2014 and why Linton priced shares in the Dutch Auction far below what they considered the company’s value. Their efforts were rebuffed, Kellner said.

“At every turn, we have either been put off, denied or shunned,” he said. “We believe the way the company is positioned, shareholder value is eroding.”

Madison attorney Tom Ragatz, a shareholder, told other stockholders at the meeting that he learned that Linton had forced employees to sell their stock during the buyback, threatening their jobs, “and then fired them anyway.”

“This is unconscionable,” Ragatz said.

Promega general counsel Dan Ghoca, asked about the accusations that Linton tried to coerce employees to sell their shares or that he asked that shares be directed to Usona, did not respond to the questions.

Promega’s board, appointed by Linton in September after the rest of the previous directors resigned in near-unison, turned down the offer by Kellner and Brand last month.

All board members now are part of Promega’s management team.

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Kellner asked for a show of hands of those stockholders who would vote against the $625 proposal. Five people, including two board members who were at the meeting, raised their hands.

Kellner said the plan he and Brand have proposed is not meant to be a hostile takeover, just an effort to see shareholders treated fairly.

“I’ve never done anything like this,” said Kellner, executive chairman of Fiduciary Management, Milwaukee. “But I want to be treated, as I think you do, fairly.”

Promega held its own shareholder meeting shortly afterward. Reporters were not allowed to attend.

It was an “informational” session that “provided attendees with information regarding the company’s status and operations, past performance and plans for upcoming shareholder communications,” general counsel Ghoca said, in an email.

Few stockholders trickling out of the Promega meeting were willing to comment.

Trent Gu said he was disappointed shareholders were not allowed to ask questions but were told to email them to a company website.

“It was one-way communication,” he said. “I thought that was odd.”

Gu, who said both he and his mother had been Promega employees, said he wanted to know why the $625 per share offer was rejected. “We were told it was rejected because it’s in the best interest of the company, employees and the community ... Let us see the numbers,” he said. “It’s not fine if you reject the offer but give no logic or thought process.”

Board member Craig Christianson told shareholders at the earlier gathering the company will provide them with more information by mid-November.

Ragatz said Linton has told numerous stockholders no other company buy-backs are planned.

Ragatz urged fellow investors, at the meeting called by the dissidents, to band together so they will own 51 percent of the company instead of Linton.

“Maybe it’s time to protect our families. Obviously, litigation is the alternative. I think that’s our last choice and only if we have to,” he said.

Brand said, after the meetings, he is not sure what the next step will be.

“We’re going to review all of our options. We’re not going to walk away,” he said.

Promega, founded in 1978, makes and sells biotechnology research products.

The company has more than 1,300 employees worldwide, including more than 750 at its Fitchburg campus, and had $367 million in revenues in 2014.

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