BresaGen merger still looks likely

The merger of BresaGen's US-based cell therapy division with San Diego stem cell company Cythera looks like it will go ahead, after the two companies executed the merger agreement last week.

The deal, which will be accompanied by a capital raising of US$5 million through venture capital investors, is still subject to approval by Cythera's shareholders. Following the merger, BresaGen (ASX:BGN) will own about 30 per cent of the combined entity, and have a seat on the board.

The company created by BresaGen's cell therapy business and Cythera will combine BresaGen's focus on degenerative diseases, such as Parkinson's, with Cythera's diabetes projects. Both companies have embryonic stem cell lines registered for use in the USA.

The merger was first announced in late November as part of a larger strategy by BresaGen to spin out its divisions into separate businesses. But the Australian company went into voluntary administration in January, after a deal with investment bank CM Capital to spin out its protein pharmaceuticals division unravelled.

The protein pharmaceuticals division has since been acquired by Queensland company CBio in a restructuring deal that will see BresaGen relist on the ASX later this year. The deed of company arrangement for the restructure was executed by the administrators last week.

Bruce Carter, of administrators Ferrier Hodgson, said that under the restructure, creditors would receive 100 cents in the dollar. An independent expert is currently preparing a report on the fairness of the deal, which will be issued to shareholders in June. Shareholders will then have an opportunity to approve the deal at a meeting in July.

"It is most unusual for companies going into administration to pay their creditors in full," said Carter. "The good news for shareholders is that they will have some value restored -- as BresaGen will ultimately be relisted."