Updated from 12:13 p.m. EDT
It seems that aaiPharma (AAII) cannot get away from the big deal that got away.
The Wilmington, N.C.-based drug company has been sued by Cima Labs (CIMA), which is seeking to recover the $11.5 million break-up fee it paid to aaiPharma after Cima called off their merger last year.
Cima also wants at least $5 million in damages, arguing that aaiPharma misled Cima and investors about its financial health.Cima eventually agreed to be acquired by Cephalon, (CEPH) of West Chester, Pa., in a deal that was finally approved by the Federal Trade Commission on Monday. The transaction, in which Cima shareholders received $34 a share, closed late Thursday afternoon, making Cima a wholly-owned subsidiary of Cephalon. Cima's lawsuit was announced Wednesday, a few days after aaiPharma revealed that a Cima representative had inquired about getting a refund on the breakup fee. In its latest 10-Q filing, aaiPharma said it would keep the money and fight any lawsuit. Cima, based in Eden Prairie, Minn., filed suit in Hennepin County District Court, accusing aaiPharma of fraud and breach of contract relating to the merger agreement they signed 12 months ago. After Cima accepted Cephalon's offer in November, Cima paid the break-up fee to aaiPharma. Cima bases its complaint on revelations by aaiPharma that have provoked investigations from the Securities and Exchange Commission and the Justice Department about aaiPharma's product-selling and accounting practices. The company recently restated earnings reports for 2002 and 2003. Cima's lawsuit alleges that it never would have considered a merger if it had known about aaiPharma's true financial condition. In addition to the $11.5 million break-up fee, Cima said it wants more than $5 million in expenses and fees related to its evaluation and negotiation of aaiPharma's offer. "Had aaiPharma's financial results as restated been public, we would not have entered into a merger agreement with the company," Steven B. Ratoff, Cima's chairman, said Wednesday. "Under the circumstances, we believe it is appropriate to seek recovery of the break-up fee and recoup the significant fees and expenses we incurred in connection with negotiating the transaction."