Buyout groups Bain Capital and Cinven are talking to investors about a potential new offer for German generic drugmaker Stada (STAGn.DE) after their 5.3 billion euro ($6 billion) bid fell through, people close to the matter said.
Investors representing 65.52 percent of Stada’s equity signed up for the bid, below a 67.5 percent threshold, despite the 49 percent premium offered by the buyout groups to trump a rival offer from private equity duo Advent and Permira.
The new offer is unlikely to see the price increased, but may come with a lower acceptance threshold, the sources said, speaking on condition of anonymity as the matter isn’t public.
Before launching a new bid, however, Bain and Cinven want irrevocable commitments from investors that they will tender their shares, the sources said.
Any new bid launched within a year would need recommendation from Stada’s executive and supervisory boards and approval by financial watchdog Bafin, as German takeover rules otherwise bar Bain and Cinven from amending their offer a second time.
The buyout groups made an initial proposal of 58 euros per share before tabling their 66 euros per share bid in April.
The sources said investors such as hedge funds held back some of their shares, speculating on securing a higher price for any remaining stock after a successful initial tender offer.
But the buyout groups also struggled to galvanize non-professional, often elderly investors, many of whom the bidders feared were ignoring or forgetting letters from their custodian banks.
A relatively large 27 percent of shares are held by retail investors. Index tracking funds that cannot tender initially but only after a successful deal hold about 12 percent of the stock.
Lowering the acceptance hurdle too far under any new offer would complicate the buyers’ efforts to get debt financing for the deal because the German takeover code requires at least 75 percent ownership for full access to a target company’s cash, which could then be used to back the borrowing.
Cinven declined to comment, while Bain was not immediately available for comment.
Stada shares, which touched a record high last month, fell to 56.51 euros, their lowest level since April, but later trimmed their losses to trade around 3 percent lower. Bain and Cinven had offered 66 euros per share.
While former counterbidders Advent and Permira remain interested in Stada, they are not expected to take immediate action to put together a new bid, but will wait to see if Bain and Cinven launch a second attempt, people close to the matter said.
Advent and Permira declined to comment.
“We had been expecting the deal to go through as we had viewed the offer as a great deal for shareholders, so we view this as a significant setback,” Jefferies analyst James Vane-Tempest wrote, who has a “hold” rating on Stada shares.
Many buyout firms are flush with cash after recent divestments and amid cheap borrowing costs. They are particularly attracted to healthcare assets for their reliable cash flows and resistance to swings in the business cycle.
“We respect the close vote of our shareholders and understand it as a mandate to press ahead with our successful growth strategy,” Chief Executive Matthias Wiedenfels said.
“However, we also regard this decision as a mark of confidence in Stada’s abilities, which our employees have impressively demonstrated, in particular over the past months.”
Stada said the termination of the deal did not have an impact on its earnings targets.
For 2017, Stada still expects sales adjusted for currency and portfolio effects of 2.28 billion to 2.35 billion euros, with adjusted earnings before interest, tax, depreciation and amortization (EBITDA) of 430 million to 450 million euros.
(Additional reporting by Alexander Hübner, Harro ten Wolde, Ludwig Burger, and Georgina Prodhan; Editing by Louise Heavens and Mark Potter)