Stada Takeover

Playing Poker with Generic Drugs

  • Why it matters

    Why it matters

    While Stada’s leadership is doing anything it can to make the takeover happen, investors looking to make a quick buck can still thwart the deal.

  • Facts

    Facts

    • A first takeover bid for Stada fell through earlier this year, but the second attempt is only a token improvement over the last.
    • US investor Paul Singer recently bought a 9-percent stake in Stada and hasn’t signaled yet whether he’s willing to tender his shares.
    • The Stada CEO claims hedge fund money will allow the drug maker to make acquisitions and grow much faster abroad.
  • Audio

    Audio

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Boehringer Ingelheim
Here today, gone tomorrow? Source: DPA

Engelbert Tjeenk Willink, the boss of drug maker Stada, told Handelsblatt that he is convinced that shareholders will accept the second takeover bid by two private-equity funds, Bain Capital and Cinven. “I consider chances to be very high. Bain and Cinven made a good offer that was upped slightly from the previous bid. We can wholeheartedly recommend that our shareholders accept it,” Mr. Willink said. “I can hardly imagine the offer falling through again,” he added. The deadline to tender shares ends on August 16. As of July 25, only 20.44 percent of Stada shares had been tendered.

In a first takeover bid for Germany’s fourth-largest pharmaceuticals firm the investors missed the threshold of shareholder acceptance, which was set at 67.5 percent. The second time around, that threshold was lowered to 63 percent, and Bain and Cinven increased their offer by 25 cents to €66.25 per Stada share. The current offer values the company at €4.1 billion ($4.82 billion).

Since the first takeover attempt fell through, hedge funds have flocked to Stada, best known for its generic drugs, in hopes of making a quick buck. “It’s surely kind of a problem that our shareholder structure is different from earlier this year. Some shareholders apparently are very focused on the short term,” Mr. Willink told Handelsblatt.

“Elliot [Partners] is likely to be an unpleasant minority shareholder.”

Jörn-Christian Schulze, corporate lawyer, Arqis

Experts estimate that hedge funds now hold more than half of all outstanding Stada shares and will hold out for an even higher bid by the potential buyers. Suggesting that there is no better deal on the horizon for stakeholders, Mr. Willink said: “If that is the case, I hope that these poker players have learned their lesson by now.”

Bain and Cinven’s second offer is considered only a token improvement over the first one, largely banking on the lower acceptance threshold. US investor Paul Singer’s purchase of a 9-percent stake in the drug maker in early July has further increased uncertainty about whether the deal will go through. Experts expect Mr. Singer’s hedge fund, Elliot Partners, not to tender its shares to Bain and Cinven, and instead to hold out for a better price. “Elliot is likely to be an unpleasant minority shareholder,” said corporate lawyer Jörn-Christian Schulze of law firm Arqis.

Mr. Schulze said that a 9-percent stake is large enough for Bain and Cinven to want to find an agreement with Mr. Singer. But if the firms were to offer Mr. Singer a better deal, they would, under German law, have to extend it to other shareholders too.

Stada Chief Executive Mr. Willink said he hasn’t been in touch with Mr. Singer. If the takeover deal went through, it would allow Stada to grow faster, he said. “With their [Bain and Cinven’s] help we could tackle acquisitions on a different scale than we could on our own, which would considerably speed up Stada’s globalization.” Reacting to speculation that the equity duo already prepared a list of potential candidates for acquisitions, Mr. Willink said he hadn’t seen any such list.

Mr. Willink also said that he expects Bain and Cinven to continue his current strategy should the deal go through. That strategy consists of combining generic drugs with branded products while globalizing. Mr. Willink is also trying to make Stada more efficient. “We have some outstanding products in Germany that are hardly sold in other markets,” the Dutchman told Handelsblatt. Acquisitions abroad also need to be better integrated into the company, he added. “Stada is more a collection of firms than a coherent company.”

Mr. Willink said biosimilars – drugs produced using biotechnology that mimic already existing medicines – offer a lucrative alternative to generic drugs, which have shrinking profit margins. “We already have two such biotech medications in the market and have license agreements for five more,” he said.

Mr. Willink was nominated earlier this month to take over the helm at Stada from Matthias Wiedenfels in what observers considered a surprise move after the first takeover bid fell through. Mr. Wiedenfells’ contract runs through the end of the year. If the deal goes through, Bain and Cinven will find their own permanent CEO. Mr. Willink, who came out of retirement for the appointment, told Handelsblatt that he would not be available for the job. “I know from personal experience what price you pay for a job like this. That means that for a longer period of time, the personal cost would simply be too high for me.”

 

Siegfried Hofmann is Handelsblatt’s chemical and pharmaceutical industries correspondent in Frankfurt. Maike Telgheder is an editor at Handelsblatt, covering the health economy, pharmaceutical companies and chemistry. To contact the authors: s.hofmann@handelsblatt.com; telgheder@handelsblatt.com

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