ProStrakan in 9.15m deal to settle French tax dispute

Published on Thursday 2 July 2009 21:20

PROSTRAKAN has settled a long-running dispute with one of its largest shareholders, after agreeing to pay 9.15 million (£7.8m) towards a tax liability incured by Aventis.

The disagreement with Aventis Pharma, part of French pharmaceutical giant Sanofi-Aventis, stemmed from ProStrakan's decision to sell its drug discovery unit, ProSkelia, in 2006.

Galashiels-based ProStrakan bought ProSkelia from Aventis in 2004, giving an undertaking at the time that it would not sell shares in the Paris-based business, as this would trigger a tax liability for Aventis. In return for ProSkelia, Aventis took Pro-Strakan shares, and it still holds 12.7 per cent of the company.

Chief executive Wilson Totten said the company was aware that the sale would probably lead to the French authorities attempting to recover the tax liability. However, the ProStrakan board decided that the funding requirements of the drug discovery business were too high to sustain, prompting a decision to either sell or close ProSkelia.

ProStrakan made a provision for the liability at the time of the sale, so yesterday's announcement will hit its cash balance, but not its profits. ProStrakan disclosed in March that Aventis was pursuing it for the full 13.4m being demanded by the French authorities, but that it hoped to come to a "mutually acceptable resolution".

The 9.15m payment ends the legal proceedings, and is less than analysts were forecasting.

Singer analyst Shawn Manning said: "The settlement removes what many investors have considered a key 'outstanding issue', the resolution of which will allow the company to focus on more-important strategic goals."

The shares closed unchanged at 88p.