Biovail case ruling extends battle for control

Wed Jul 16, 2008 2:52pm EDT
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By Scott Anderson

TORONTO (Reuters) - A fight for control of Biovail Corp BVF.TO went into a second round on Wednesday when a judge ruled a shareholder vote last month that went against the Canadian drugmaker's founder was held improperly by the company's board and management.

An Ontario court judge ordered Biovail to reconvene the shareholder meeting held on June 25 within 90 days. When it does, shareholders will vote on a new slate of directors being proposed by founder Eugene Melnyk to replace the incumbent board.

Melnyk, who is Biovail's biggest shareholder, argued that last month's meeting was held improperly because it lacked a quorum. Just moments before it started, the company had changed the quorum requirement that 51 percent of shares be represented to 25 percent so that the meeting could proceed.

On Wednesday, Justice Herman Wilton-Siegel determined that the bylaw amendment was not valid.

"Unless the by-law amendment was valid and effective ... a valid quorum did not exist for the transaction of business, including the election of officers," Wilton-Siegel wrote in his decision.

Melnyk, the millionaire owner of the Ottawa Senators National Hockey League team, had pulled his own block of about 18.8 million shares in advance of the meeting in attempt to have it postponed so that he could build more support for his plan.

He has proposed a new emphasis on the company's product pipeline, including a return to "difficult to manufacture" generic drugs, as well as acquiring more products and technologies.

Melnyk chose to challenge the company, claiming he lost confidence in the board. The current management wants to shut operations in Puerto Rico and shift to new treatments for disorders of the central nervous system.   Continued...

<p>Biovail company founder and majority shareholder Eugene Melnyk speaks at a news conference in Toronto, June 25, 2008. REUTERS/Mark Blinch</p>