Affymetrix Sued by Tang Capital for Fraud Over Merger Terms

Affymetrix Inc. was sued for fraud by investment firm Tang Capital Partners LP, which claims the maker of genomic analysis tools misrepresented the financing of an acquisition for which it depleted cash meant to repurchase $95 million in notes bought by Tang and other investors.

Tang Capital, which purchased $78 million of Affymetrix’s 3.5 percent senior notes from 2008 to 2011, alleged in a complaint filed yesterday in state court in San Jose, California, that the repurchase money is being used as collateral to finance Affymetrix’s acquisition of eBioscience Holding Co.

The $330 million cash deal was announced Nov. 30. The merger triggers a repurchase provision in the note contract that Santa Clara, California-based Affymetrix has refused to honor, Tang said in the complaint. Lenders financing the acquisition have first priority over the $95 million that should be used to repurchase the notes after the takeover closes, a fact that wasn’t disclosed to Tang Capital, according to the complaint.

Tang seeks to represent other investors and asks in the complaint for a court order blocking Affymetrix from transferring the $95 million or assigning priority interest in the money and other damages.

Affymetrix said in a regulatory filing yesterday that it believes the suit is “without merit” and it plans to complete the eBioscience acquisition in January.

The case is Tang Capital v. Affymetrix, 11-cv-215830, Santa Clara County Superior Court (San Jose, California).

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