UPDATE 2-Javelin sues Hospira alleging breach of merger deal

Thu Jun 3, 2010 9:48am EDT

* Hospira further extends tender offer to June 16

* Hospira fails to pay for tendered Javelin shares: Javelin

* Javelin says Hospira breached loan agreement

* Javelin shares down as much as 20 pct (Adds details on Hospira extending offer date, updates share movement)

June 3 (Reuters) - Javelin Pharmaceuticals Inc JAV.A said it filed a lawsuit against its would-be acquirer Hospira Inc (HSP.N) and its unit, claiming they have breached the merger agreement, sending Javelin shares down as much as 20 percent.

In April, Hospira agreed to acquire Javelin for $145 million in cash, but on May 19, it extended the tender offer to June 2.

Separately, Hospira said Thursday, its unit Discus Acquisition Corp, which was formed to acquire Javelin, has further extended its tender offer to June 16, citing issues related to the recall of certain batches of Javelin's post-operative pain drug, Dyloject. [ID:nSGE64N1SQ]

In its statement, Hospira said after expiration of the offer, it intends to acquire all remaining outstanding shares of Javelin common stock by means of a merger under Delaware law, if all conditions of the tender offer have been met.

As of the expiration of the current offer period on June 2, about 78.47 percent of the outstanding shares of Javelin common stock, had been validly tendered and not withdrawn, Hospira said.

While Javelin said all the conditions of the tender offer were satisfied immediately prior to the expiration of the initial offering period, Hospira said that based on its evaluation of Dyloject issue, all the conditions to the offer had not been satisfied.

"Neither Hospira nor Discus has identified the condition or conditions to completion of the tender offer that Javelin has failed to satisfy," Javelin said in a statement.

Javelin alleged that Hospira and Discus failed to accept and pay for Javelin shares tendered through May 18 and also breached the terms of a loan agreement that the companies entered into in April.

Under the loan agreement, Hospira was obligated to provide Javelin an additional loan of $2 million on June 1, the company said.

Javelin said it sought to compel Hospira and Discus to complete the agreed-upon merger.

Shares of Javelin were down 13 percent at $1.32 in morning trade on the American Stock Exchange. Hospira shares were trading up 1 percent at $52.30 Thursday on the New York Stock Exchange. (Reporting by Anand Basu in Bangalore; Editing by Vyas Mohan)

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