Stada Gets $3.7 Billion Takeover Offer as Two Bidders Emerge

(Bloomberg) -- Stada Arzneimittel AG said it has received two offers, one valuing the German drugmaker at about 3.5 billion euros ($3.7 billion), as suitors compete for access to German and Russian markets for over-the-counter and generic medicines.

Cinven Ltd. offered 56 euros a share, the Bad Vilbel-based drugmaker said on Sunday. Stada also initiated “open-minded talks” with Advent International Corp. after receiving legally non-binding expressions of interest from both suitors, it said in a statement Monday. The stock surged, clocking its biggest gain in almost eight years.

Speculation about takeover interest propelled the stock up almost 90 percent in the past year after activist investor Active Ownership Capital Sarl successfully campaigned to overthrow a rule it said gave Stada’s board undue influence over ownership of the company. The unexpected departure of Chief Executive Officer Hartmut Retzlaff in June, after more than two decades at the helm, also made the drugmaker appear even more appealing amidst an industry-wide wave of consolidation.

The drugmaker, which sells copies of medicines such as Viagra, has ambitious plans to boost revenue to 2.6 billion euros by 2019, up 23 percent from 2015, as both its branded medicines and cheaper copycat drugs expand sales. Profit excluding some costs were projected to gain 50 percent to 250 million euros as the company pares expenses. Stada is scheduled to report 2016 results on March 23.

Deal Premium

A takeover would give the buyer access to Russian and German markets for over-the-counter and copycat drugs. The company is known for medicines such as Grippostad, to treat the common cold, and pain relief treatment tilidine naloxone. Its biggest pharmaceutical product is APO-go, used in the care of patients with Parkinson’s disease, which generated 63 million euros in sales last year.

Advent’s and Cinven’s proposals could each offer “attractive opportunities,” Stada said in the statement on Monday. With the discussions, the board wants to “allow the interested parties to explain their strategic concepts and evaluate further value-enhancing potential with regards to the potential offer price.” Representatives for Cinven and Advent declined to comment.

Cinven’s bid carries a 13 percent premium over Stada’s closing price of 49.70 euros on Friday, and values the company at about 3.5 billion euros. Shares of the German company were up 14 percent at 56.78 euros as of 3:02 p.m. in Frankfurt.

Shareholders voted in August to oust Chairman Martin Abend and bring in new independent directors.

Industry Consolidates

The business may also attract interest from other companies including Polpharma SA, the Polish drugmaker, which contacted Stada last year and has talked to private equity bidders about teaming up, according to people familiar with the matter. Polpharma may decide against pursuing a bid, they said. A representative for Polpharma couldn’t be reached immediately for comment outside of regular business hours.

The Financial Times, citing unidentified people, said earlier on Sunday that Cinven made a bid and then Bloomberg News reported that Advent had made a takeover proposal as well. Bloomberg News reported in December that the drugmaker had attracted interest from several private equity firms, including Bain Capital, Permira, and CVC Capital Partners.

An acquisition of Stada would add to a string of deals in the generics industry. Israel’s Teva Pharmaceutical Industries Ltd. acquired a division that makes copycat medicines from Allergan Plc last year for $40.5 billion to once again become the world’s biggest maker of generic drugs. Meanwhile Mylan NV, rebuffed by Perrigo Co., bought Sweden’s Meda AB for $7.2 billion. Switzerland’s Novartis AG has also said it could spend up to $5 billion for bolt-on acquisitions including assets to strengthen its Sandoz division, which is currently the world’s second-largest maker of copycat drugs.

Advent, which has $42 billion of assets under management, has experience in acquiring listed businesses in Germany, as it did in 2013 when it acquired beauty retailer Douglas Holding AG.

Cinven, based in London, focuses on six sectors including health care, according to its website. Previous health-care deals by Cinven include the $1.3 billion purchase of French laboratory operator Labco SA in 2015.

--With assistance from Caroline Chen and Johannes Koch To contact the reporters on this story: Sarah Syed in London at ssyed35@bloomberg.net, Manuel Baigorri in London at mbaigorri@bloomberg.net, Aaron Kirchfeld in London at akirchfeld@bloomberg.net. To contact the editors responsible for this story: Aaron Kirchfeld at akirchfeld@bloomberg.net, Chitra Somayaji