Life Sciences Research (LSR), the company set up in 2001 so that UK-based animal testing business Huntingdon Life Sciences could relocate to the US, has signed a definitive agreement to be acquired by Lion Holdings, Inc for US$8.50 per share.

Lion Holdings is an entity controlled by LSR’s chairman and chief executive officer, Andrew Baker, who in March submitted a non-binding proposal to acquire all of the company’s outstanding shares for US$7.50 per share.

Under the definitive merger agreement, LSR stockholders other than Baker and his affiliates will receive US$8.50 per share in cash, a premium of around 77$ over the company’s closing price on 3 March 2009, the last trading day before Baker’s initial proposal was announced.

The merger was recommended unanimously by a special committee of independent LSR directors charged with evaluating strategic alternatives for the company. According to committee chairman Gabor Balthazar, the strategic review process was “rigorous and thorough and involved extensive negotiations over a four-month period”.

The special committee “spent a significant amount of time and effort exploring strategic alternatives, including a broad solicitation of third party proposals”, he added. “We believe this transaction is in the best interests of Life Sciences Research and its stockholders.”

Two US law firms beg to differ and have filed class action suits in the New Jersey Superior Court challenging the proposed acquisition.

Levi & Korsinsky says the agreed terms raise “questions as to whether the Life Sciences Board of Directors breached their fiduciary duties to shareholders”, given that the company’s shares traded at US$9.83 as recently as 5 January 2009 and at more than US$32 in the fourth quarter of 2008; at least one analyst set a price target for LSR of US$20 per share; and the company agreed to a non-solicitation provision and a termination fee of up to US$4,460,000 “that will all but ensure that no superior offer will ever be forthcoming”.

The other law firm, Brodsky & Smith, notes that Life Sciences Research traded significantly above the offer price “throughout 2008”, while as recently as last October “it was trading above US$35.00 a share and was still trading above US$10.00 a share in December 2008”.

The merger was approved by the LSR board of directors based on the special committee’s recommendation, with Andrew Baker and Brian Cass abstaining, the company said. The committee was “advised by independent counsel and an independent financial advisor who provided a fairness opinion to the Special Committee”, it added.

The transaction is expected to close in the fourth quarter of 2009, subject to conditions including approval by LSR shareholders.

Huntingdon Life Sciences was forced overseas to the US after a sustained campaign of intimidation persuaded the Royal Bank of Scotland to sever its ties with the company. None of the other leading UK banks wanted to step into the breach and eventually the Bank of England took over HLS’ finances.