Ipsen SA acquisition of Clementia Pharmaceuticals includes a significant contingent cash payment (CVR)

The cash consideration for the proposed acquisition of Clementia Pharmaceuticals (a Canadian-incorporated NASDAQ-listed clinical-stage biopharmaceutical company) by a Canadian Buyco subsidiary of Ipsen S.A. includes not only an up-front cash payment of US$25.00 per share (for an aggregate of US$1.04 billion) but also a deferred payment, on the achievement by the end of 2024 of FDA approval of a new drug application made by Clementia, in the form of a contingent value right ("CVR") of US$6.00 per Share. The Canadian tax disclosure states that the proceeds of disposition to a Clementia shareholder are the Canadian-dollar equivalent of the full U.S.$31 per Share, but that the Clementia shareholders should consult with their tax advisors as to the availability of an s. 42(1)(b) capital loss if the timely FDA approval is not achieved.

The U.S. tax consequences to U.S. shareholders turn on whether the fair market value of the CVRs is “reasonably ascertainable.”

Neal Armstrong. Summary of Clementia Pharmaceuticals Circular under Mergers & Acquisitions – Cross-Border Acquisitions – Inbound – Canadian Buyco.