Stada's $5.9 Billion Sale Fails as Investors Spurn Takeover

(Bloomberg) -- Stada Arzneimittel AG’s months-long sale process unraveled as a small group of the German drugmaker’s investors held out for a better deal than the 5.3 billion-euro ($5.9 billion) offered by two private equity firms.

Only 65.5 percent of the shares were tendered in Bain Capital and Cinven’s offer by the Thursday deadline, Stada said in a statement late Monday. The suitors were seeking pledges of 67.5 percent. The two firms said they’ll return any stock received to shareholders.

Bain and Cinven’s bid of 66 euros a share prevailed only after weeks of fierce competition as private equity firms seeking control of one of Europe’s last big independent generic-drug companies locked horns. This month, the duo had to lower the acceptance level from 75 percent and extend the expiration of the offer period from June 8 in an attempt to sway more holders.

Since the offer failed, the buyout firms have been assessing the situation and holding exploratory talks with advisers, financing banks and shareholders about the feasibility of renewing their offer, people familiar with the matter said. To do that, they’d need approval from Stada’s management and German regulator BaFin to overcome a rule banning failed acquirers from making a new offer for 12 months.

Buyout firms Advent International Corp. and Permira, which had bid for the German drugmaker during the auction before losing out, are also speaking to advisers about whether they should try a fresh bid, though no offer is imminent, the people said, asking not to be identified because the deliberations are private.

Shanghai Pharmaceuticals Holding Co., which had previously teamed up with Advent and Permira, is separately considering whether it could buy a stake of up to 30 percent on its own or team up again with private equity, they said.

The deliberations are at an early stage and none of the potential bidders have decided yet whether they’ll move forward, they said. Representatives for Bain, Cinven, Advent, Permira and Shanghai Pharma declined to comment. Bain and Cinven’s interest in a new bid was previously reported by Reuters.

“We are perplexed as to why investors didn’t take the deal,” James Vane-Tempest, an analyst at Jefferies in London, said in a note to clients. “We did not anticipate an interloper, or counter-bid, and believe it will take time for fundamentals to command the same kind of premium.”

Bad Vilbel, Germany-based Stada dropped 3.1 percent to 59.88 euros at 4:02 p.m. in Frankfurt after falling as much as 8.6 percent.

Confidence Vote

Company executives thanked shareholders for what they described as a vote of confidence and said they hadn’t sought an acquirer in the first place.

“We were never looking for a new ownership structure, so the growth strategy will continue as planned,” Chief Executive Officer Matthias Wiedenfels said on a conference call on Tuesday. The takeover proposal is “off the table” for now, he said, and he wouldn’t speculate on what may come next. Stada is always open for new offers, he said.

The maker of Grippostad, which Stada says is Germany’s best-selling cold remedy, aims to garner as much as 2.7 billion euros in sales by 2019 and increase adjusted earnings before interest, taxes, depreciation and amortization, a key measure of profit, as high as 590 million euros, up from about 406 million euros last year. Stada said on Monday that the deal’s collapse won’t affect its 2017 and medium-term financial goals.

Shareholder Structure

Unlike rivals, the company had eluded a takeover for years thanks to an unusual shareholder structure and entrenched management, until investor Active Ownership Capital Sarl led a revolt last year. Former Chief Executive Officer Hartmut Retzlaff resigned after 23 years at the helm in August, paving the way for change. The shares began to soar in December as takeover speculation heated up after languishing at an average price of about 32 euros over the previous five years.

The drugmaker attracted buyers’ interest from as far away as China as lackluster profitability left room for slashing costs and streamlining the manufacturing process.

Stada, whose name is derived from the terms standardization and apothecaries, was born at the end of the 19th century when German pharmacies collaborated to create medicines of a uniform quality that could be sold throughout their network. The company makes Ladival sunscreen as well as Grippostad. Until 1993, only pharmacists could buy its shares.

A group that included buyout firm Advent considered making a last-minute bid in May, after Stada had already agreed to the transaction with Bain and Cinven. It’s unlikely the group would be willing to offer more than 66 euros a share now, said Daniel Wendorff, an analyst at Commerzbank AG.

“Given that we were already astonished about the 66-euro-a-share offer including the dividend, we are even more surprised about that only 65.5 percent of shares were tendered,” he wrote. “As we speculate that a number of investors were not tendering as they hoped for an even higher offer, the question is would it make sense at all to offer less than 66 euros.”

(A previous version of this story corrected the spelling of the CEO’s name.)

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