McKesson finalises Celesio takeover
The headquarters of Celesio AG stand in Stuttgart, Germany, in this undated handout photo released to the media on Thursday, Oct. 24, 2013. McKesson Corp., the largest U.S. pharmaceutical distributor, agreed to buy Germany's Celesio AG for about 3.9 billion euros ($5.4 billion) to boost its share of the growing global generic-drug market.©Bloomberg
McKesson, the US drug distributor, has won its hard-fought takeover of Celesio in a deal that values the German pharmaceutical group at $8.6bn, including debt.
McKesson said on Thursday evening that it had secured ownership of close to 75 per cent of Celesio’s shares after striking an agreement with German investment company Franz Haniel to acquire its stake.
The US group also confirmed it would buy convertible bonds in the company owned by Elliott Management, the New York hedge fund, which amount to about 8 per cent of Celesio’s stock.
The deals mean McKesson can now enter into a so-called domination and profit and loss transfer agreement with Celesio, allowing it to wrest control of Celesio and gain access to its cash flows.
McKesson did not disclose the terms of the deal with Elliott. However, people familiar with the situation said the drugs group had paid a “significant premium” for the convertible bonds.
The takeover was initially opposed by Elliott, which rapidly built a big position in Celesio while arguing McKesson’s initial €23-a-share offer was too low.
The hedge fund, which is growing in stature as one of America’s most energetic activist investors, eventually agreed to sell to Haniel last week when McKesson raised its bid to €23.50 a share.
“It is a fair assumption to make that Elliott would not have made so much noise about getting the price of the deal bumped by €0.50 if there was not a premium for the other part of the deal [purchase of convertible bonds],” said a person familiar with the structure of the agreement.
Haniel agreed to sell its stake to McKesson last October in a deal to create one of the world’s biggest pharmaceutical distribution groups. The family-owned group has been eager to broker a deal to sell Celesio as it looks to make fresh investments in Germany. The sale will leave German retail giant Metro as the largest holding in the Haniel portfolio.
Stephan Gemkow, chief executive of Haniel, said on Thursday that “the two companies are an excellent fit, and I wish them – and especially their employees – every commercial success.”
John Hammergren, chief executive of McKesson, said the increased scale and improved supply chain efficiencies would benefit his customers.