A protracted corporate struggle has unfolded between two Australian biotech companies as they negotiate a high-stakes merger amid competing shareholder interests and concerns over valuation and control.
Genetic Technologies, a Sydney-based biotech firm valued by the market at under A$18 million, has found itself at the center of a shareholder standoff following a significant equity acquisition by BCAL Diagnostics. In late August, BCAL boosted its stake in Genetic to 18.5 percent through purchases made via a shelf company, Lawn Views, a move that prompted resistance from Genetic’s board and stirred tensions within the company.
On the same day BCAL increased its holdings, Genetic’s chairman Caroline Waldron unexpectedly resigned, coinciding with the company’s announcement of merger discussions with Microba, a Brisbane-based specialist in gut diagnostics valued at approximately A$36 million. The proposed deal was widely interpreted not as a shareholder-friendly rescue, but rather a strategic "shotgun wedding" aimed at curbing BCAL’s growing influence.
Under the merger terms negotiated in September, Genetic would technically acquire Microba through a scheme of arrangement; however, the structure effectively allows Microba to conduct a reverse takeover. Shareholders of Microba would receive 67 percent of the combined entity’s shares, leaving existing Genetic investors with just 33 percent. The merged board would include three directors from each company.
Despite this arrangement, the deal values Genetic shares at a discounted 8.38 Australian cents each, reflecting a company valuation just below its A$22.1 million cash reserve. Microba, by contrast, holds significantly less cash (A$5.2 million net) but is valued higher due to promising revenue prospects. This valuation has drawn criticism, notably from BCAL and institutional investor Regal Funds Management, which has flagged concerns about significant dilution for current Genetic shareholders.
Luke Reid, Microba’s chief executive who is currently on medical leave, has reportedly urged Genetic to reconsider the merger terms to increase Genetic’s share price above 9 cents. However, Genetic has structured the shareholder vote so that only a simple majority is required to approve the share issuance underpinning the deal, a departure from the 25 percent threshold that would have been necessary to block the transaction if Microba had led it.
BCAL is actively challenging the merger by leveraging its shareholding ahead of a critical shareholders meeting scheduled for October 28. The company is seeking to remove two long-serving Genetic directors, Jenny Harry and US-based executive director Michael Aicher, the latter of whom also serves as chairman. BCAL aims to install Susan Forrester and former Genetic CEO John Melki in their place. Genetic’s management has rejected this initiative, warning that such boardroom upheaval could destabilize the company and grant BCAL disproportionate control despite holding less than 20 percent of shares.
Both Genetic and Microba are also contending with financial pressures. Genetic reportedly burns through about A$1 million in cash monthly, which would reduce its reserves by approximately A$4 million before the deal’s projected February completion. Microba faces a similar cash burn rate, making access to Genetic’s cash position a key driver for the merger.
The dispute highlights broader challenges facing Australia’s biotech sector as companies grapple with funding constraints, shareholder activism, and competitive corporate maneuvers. The outcome of the Genetic-Microba deal and BCAL’s boardroom campaign is poised to influence not only the companies involved but also the sector’s future innovation prospects.