Friday, June 11, 2010

Medafor's board gets a vote of confidence

Shareholders of Brooklyn Center-based Medafor Inc. on Thursday decisively rejected a suitor's proposal to withhold support from the company's board after it turned down a takeover bid.
The Atlanta biomedical firm CryoLife Inc., which is Medafor's top distributor and shareholder, abandoned its $2-a-share cash and stock bid for the privately held company in March. The Medafor board dismissed it as "grossly inadequate."
But the two companies continue to duke it out in federal court, most recently over Medafor's decision to sever the distribution agreement between the two. CryoLife had also proposed withholding support for the five-member board, on the grounds that it "has overseen the destruction of Medafor's business, its technology and the value of its shares."
Shareholders who control roughly 70 percent of the company's shares voted by a 95 percent margin to re-elect the board.
At the center of the dispute is Medafor's unique blood-clotting powder, called HemoStase, which CryoLife distributes in the United States and in some markets abroad. But the legal status of that agreement is now unclear: A ruling by a federal district judge on the matter is expected soon. (While sales have temporarily lapsed in those markets as a result of the dispute, Medafor says customers will continue to be served after the ruling.)
At Thursday's meeting, held at the Northland Inn in Minneapolis, Medafor's CEO Gary Shope said the company's revenue in 2009 grew 40 percent to $13.8 million. He said trends in the business are strong through the first quarter of this year.
"The Medafor of today is a revitalized company," Shope said. "We've had a few bumps in the road, but we'll get through it."
The real problem for Medafor is the distraction and expense stemming from CryoLife's takeover bid and continuing litigation, Shope said. Had it not been for the $1.2 million the company shelled out for legal expenses last year, Medafor would have been profitable, he said.
The meeting was attended by about 175 shareholders, who listened as Shope and Chairman Michael Pasquale tag-teamed a series of questions.
Many shareholders appeared frustrated that they haven't been able to cash out their long-held stock at a profit. "I say get rid of CryoLife and let investors make some money," said Jim Karercher, a longtime investor from Ortonville, Minn.
Some asked for salary figures for the two executives, a request that was denied. CryoLife claims the company's CEO and chief financial officer earned a combined $700,000 last year.
Another shareholder asked why Pennsylvania residents Shope and Pasquale don't live in Minnesota, where the company's 21 employees are based. Pasquale said the company is global, and it isn't necessary to live locally.
One noticeable absence from the meeting was Steven Anderson, CryoLife's CEO, who is a Minnesota native and a former Medtronic Inc. executive. Anderson had planned to attend the meeting, but was waylaid by a family emergency, according to CryoLife spokeswoman Nina Devlin.

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