August 5, 2010 / 3:27 PM / 9 years ago

UPDATE 1-Ramius objects to Cypress' termination of Savella deal

* Says Cypress did not consult investment banking advisors

* Shares down 1 pct

Aug 5 (Reuters) - Hedge fund Ramius, which had offered to buy drugmaker Cypress Bioscience Inc CYPB.O in July, said it has sent a letter to Cypress’ board objecting to the company’s decision to discontinue co-promoting fibromyalgia drug Savella with partner Forest Laboratories FRX.N for only $2 million.

Disgruntled stakeholder Ramius, which currently holds a 9.9 percent stake in Cypress, has been trying to stop the company from approving any acquisitions. [ID:nSGE66I0H5]

Ramius questioned Cypress’ decision to discontinue the Savella deal without consulting the investment banking advisors who have been engaged to determine the impact of such a termination on Ramius’ acquisition proposal.

On Wednesday, Cypress discontinued its right to co-promote Savella with partner Forest Laboratories FRX.N, and said it will reduce its workforce by about 86 percent, affecting 123 employees. [ID:nSGE6730HI]

Ramius also said it is willing to work with Cypress to complete a transaction by executing a definitive agreement to purchase the company or by participating in a formal auction process alongside other potential acquirers.

“Given the Board’s recent action to hire investment banking advisors, we believe the prudent thing to do is to halt all extraordinary transactions until the company has time to fully explore maximizing value for shareholders,” Ramius Partner Managing Director Jeffrey Smith said in the letter.

Shares of the company were down 1 percent at $3.60 Thursday on Nasdaq. (Reporting by Anand Basu in Bangalore; Editing by Roshni Menon)

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