CVC faces shareholder revolt over €10.7bn Recordati take-private
Investors accuse private equity group of pressuring them into selling at ‘lowball’ price
CVC is facing a shareholder revolt over its attempt to take Milan-listed pharmaceutical group Recordati private at what investors claim is an unfairly low valuation.
Shareholders have written to Recordati’s board arguing that CVC’s €51.29-a-share tender offer undervalues the Italian drugmaker and is structured to pressure minority investors into selling.
Six minority shareholders, including several long-only investors, told the FT they opposed the terms of the offer and raised concerns about the governance of the proposed deal.
One letter to the board, from London-based activist investor Palliser Capital, accused CVC of trying to “railroad” minority shareholders into selling at a “lowball price”.
The letters come amid a split between Recordati’s independent directors and the rest of the board over the merits of the CVC bid.
All four independent directors opposed the take-private, concluding that the offer price was “inadequate from a financial standpoint”, put shareholders under “a relevant degree of pressure to tender” and that the offer as a whole was “not fair”.
CVC has made clear in board-level discussions in Milan that it wants an exit from Recordati, according to people familiar with the conversations.
The private equity group has owned the drugmaker since 2018 when it led a consortium that agreed to pay €3.03bn for the Recordati family’s holding company, which owned 51.8 per cent of the drugmaker. That deal implied an equity valuation for the company as a whole of €5.86bn.
CVC had been seeking to sell Recordati for five years before launching the take-private earlier this year, the people said, but struggled to attract bids at a valuation above that implied by the current tender offer.
In May, CVC teamed up with Belgium’s Groupe Bruxelles Lambert and other investors to launch the €51.29-a-share tender offer aimed at delisting Recordati, valuing the company’s shares at about €10.7bn. The price represents a 13 per cent premium to Recordati’s share price before news of CVC’s planned takeover emerged in March.
CVC attributes the low premium to Recordati’s complex structure and the risks surrounding its key blockbuster drug, according to people familiar with the private equity group’s position.
Recordati has two distinct businesses: a mature pharmaceuticals division and a fast-growing rare diseases franchise with significant expansion potential in the US.
That opportunity is potentially huge but is also exposed to US policy changes. The current administration has moved to cut the prices of high-cost branded medicines, including by linking US prices to those paid in other high-income countries.
Investors argue that the take-private would cash them out just as Recordati’s rare diseases business enters a potentially lucrative period of growth, allowing CVC to capture any upside by eventually separating and selling the businesses individually.
CVC nevertheless plans to press ahead with the take-private even if it fails to reach the 90 per cent threshold needed to squeeze out remaining shareholders.
According to the offer documents, it could reshuffle the board and pursue a delisting through a subsequent merger, leaving holdout investors facing either illiquid shares or forced to cash out at a price they consider inadequate. People close to the matter said the board reshuffle reflected a previous agreement between CVC and Groupe Bruxelles Lambert that envisaged equal representation between the investors.
If it cannot take the company private, people familiar with its position said that CVC would pursue alternative ways of selling its controlling stake, including via a block sale — a prospect that could weigh on Recordati’s shares.