TORONTO (Reuters) - Labopharm Inc DDS.TO, a Canadian biotech company specializing in controlled-release drugs, has agreed to be bought by Paladin Labs Inc PLB.TO, ending a months-long search for a suitor.
Paladin said it would pay 28.57 Canadian cents a share in cash for Labopharm, valuing the company at about C$20 million ($20.4 million), a 68 percent premium over its closing share price of 17 Canadian cents on Tuesday.
The stock jumped 62 percent at the open in Toronto on Wednesday to 27.5 Canadian cents a share.
"The board of directors has concluded that this all-cash offer, which is at a significant premium to the trading price of Labopharm's shares, is the best way to maximize shareholder value," Labopharm Chairman Santo J. Costa said in a statement.
Labopharm has struggled in recent months and was forced to delist its common shares from the Nasdaq in June after failing to maintain a minimum bid price of $1 a share and a market value of listed securities of $50 million.
In March, it replaced its chief executive, cut its work force and said it was in the market to explore strategic options.
In May it reported a first-quarter loss of C$12.4 million, hurt by costs associated with the job cuts.
"The offer from Paladin provides compelling value, certainty and liquidity to our shareholders," Costa said.
Paladin, with a market capitalization of C$818 million, mainly targets the acquisition or in-licensing of pharma products for the Canadian market. It is also in the middle of a hostile C$56.7 million takeover bid for Canada's Afexa Life Sciences Inc FXA.TO.
Afexa is fighting the bid, saying it significantly undervalues the company, which makes the over-the-counter cold and flu remedy COLD-FX.
Paladin shares were flat at C$40.50 in thin Toronto trading on Wednesday morning.
Reporting by Pav Jordan in Toronto; editing by Janet Guttsman; editing by Peter Galloway