FRANKFURT (Reuters) – Bain Capital and Cinven have won control of Germany’s Stada (STAGn.DE) with a sweetened 5.3 billion euro ($6.2 billion) bid for the generic drugmaker, in the largest takeover of a listed German company by buyout firms.
Months of uncertainty for Stada ended as investors tendered by the Wednesday deadline 63.85 percent of its shares, more than the 63 percent minimum acceptance threshold, the private equity groups said on Friday.
“We are pleased that the question of the future ownership structure has now been settled,” Engelbert Coster Tjeenk Willink, Stada’s chief executive, said in a statement.
Buyout firms have been flush with cash after selling assets and borrowing cheaply and healthcare is a prime target for them due to its reliable cash flows and long-term growth prospects.
Although the Stada bidders had lowered the minimum level from 67.5 percent, after their first offer yielded acceptances of only 65.52 percent, the second attempt was still “very, very close,” a banker familiar with the process said.
Both offers were supported by Stada’s management, which previously ran an auction in which Bain and Cinven beat a consortium of buyout groups Advent and Permira.
At less than 10 percent, private equity ownership of healthcare firms with over 100 million euros in sales is well below other sectors in Europe, McKinsey said in a recent study.
Buyout firms have been discouraged by a patchwork of national healthcare rules, but interest is on the rise, it said.
Shares in Stada jumped more than 13 percent, ending Friday’s trading session at 72.55 euros, well above the offer price amid speculation that minority shareholders can extract an even higher price from the private equity groups as they seek to take full control of Stada.
If Bain and Cinven manage to cross the 75 percent threshold, it will allow them to tap into Stada’s cashflow to service their debt, but they would also then have to make a buyout offer to minority shareholders, who could demand a mark-up in court.
A takeover was put in doubt when the bidders warned they were struggling even more than before to galvanise private individuals holding some 25 percent of Stada. But hedge funds, which had held on to shares in the hope of fetching an even higher price from Bain and Cinven once the pair have gained control, appeared to have yielded.
Sources have said that Bain and Cinven would look into buying more healthcare businesses to combine with Stada over the medium term, seeking cost cuts that would make the extra cost of their investment in Stada worthwhile. Sanofi’s (SASY.PA) European generics business, which the French drugmaker will put up for sale later this year, will be among the assets targeted, sources have said.
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August 19, 2017