Footstar to acquire CPEX Pharmaceuticals

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Jan 5 2011

Footstar, Inc. ("Footstar") announced today that certain of its subsidiaries have entered into a definitive merger agreement with CPEX Pharmaceuticals, Inc. (Nasdaq: CPEX), an emerging specialty pharmaceutical company, in a transaction valued at approximately $76.6 million, plus fees and expenses relating to the transaction. Pursuant to the merger agreement, FCB I Acquisition Corp. ("FCB Acquisition"), a wholly owned subsidiary of FCB I Holdings Inc. ("FCB Holdings"), will merge into CPEX and CPEX shareholders will receive $27.25 per share in cash. The transaction was unanimously approved by the Footstar Board of Directors.

FCB Acquisition is a wholly owned subsidiary of FCB Holdings, which is owned 80.5% by Footstar Corporation and 19.5% by an unaffiliated investment holding company (the "Co-Investor"). Footstar Corporation is a wholly owned subsidiary of Footstar.

The transaction is being financed through a combination of equity and debt. Footstar Corporation and the Co-Investor are providing approximately $3.2 million and approximately $0.8 million of equity financing, respectively. In addition, FCB Holdings has received combined commitments from Footstar Corporation and the Co-Investor to provide a $13 million secured bridge loan. In addition, certain debt financing parties have agreed to provide debt financing in the form of a $64 million secured term loan pursuant to its terms.

The transaction is subject to the receipt of CPEX stockholder approval and satisfaction of other customary closing conditions. Certain of CPEX's directors and employees, who currently own an aggregate of approximately 19.6% of the outstanding CPEX shares, have agreed to vote their shares in favor of the transaction and recommend that all CPEX shareholders approve the transaction. The transaction is expected to close in the second quarter of 2011.

FOOTSTAR HAS A SHAREHOLDER RIGHTS PLAN, WHICH CONTAINS PROVISIONS THAT PROHIBIT ANY PERSON OR GROUP FROM ACQUIRING BENEFICIAL OWNERSHIP OF MORE THAN 4.75 PERCENT OF FOOTSTAR'S COMMON STOCK WITHOUT ITS PRIOR CONSENT AND AS FURTHER PROVIDED THEREIN.

Olshan Grundman Frome Rosenzweig & Wolosky LLP is serving as legal advisor to Footstar.

Source:

Footstar, Inc.

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