Did you back this multi-bagger?
City super-investor Neil Woodford will be smiling today. One of his small-cap bets has just come up trumps.
Woodford bought into AIM-listed biopharmaceutical firm Proximagen (LSE: PRX) three years ago in a placing at 140p per share. And hopefully, a few Fools took note when I highlighted the company at 87p in 2010!
Today, it was announced that US drug-maker Upsher-Smith Laboratories is to buy Proximagen for 320p per share in cash with up to a further 192 pence in either cash or loan notes by way of a contingent value right (CVR), which is linked to the future success of two of Proximagen's drugs.
Layer cake
The deal looks to be all but in the bag. Proximagen's directors have recommended the offer and are supported by the holders of 72% of the company's shares, including Woodford's Invesco Perpetual Income and High Income funds and Lansdowne Partners, the hedge fund manager that reportedly made £200m betting on the credit-crunch share price collapses of Barclays (LSE: BARC) and Northern Rock.
As I write, Proximagen's shares are trading at 332p, up just over 20% on yesterday's close and at a small premium to Upsher-Smith's 320p bid. Given the potential of a further 192p of value for shareholders, the current share price implies the market either sees only modest value in the CVR or doesn't have enough information to assess the likely value.
Be that as it may, I'm sure investors who participated in Proximagen's placing at 140p per share, and any lucky Fools who snapped up shares at 87p two summers ago (not me, sadly!) will be more than happy with a 320p per share return. Anything up to 192p on top of that will simply be icing on the cake.
Serious money
Neil Woodford looks like getting a great result from his Proximagen bet, and it's the first of three small-cap "buy-what-Woodford-bought-but-cheaper" opportunities I've highlighted for you over the last couple of years.
Don't forget, though, that Woodford is best known for making big bets on great blue-chip dividend shares. If you want to know where he's been investing serious money, get yourself a sight of the Motley Fool report "8 Shares Held By Britain's Super Investor" – it's free to download right now.
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Further investment opportunities:
> G A Chester does not own shares in any of the companies mentioned in this article.
