Fresenius Said to Decide Against New Rhoen-Klinikum Bid

Fresenius SE decided against reviving its bid for German competitor Rhoen-Klinikum AG (RHK), capping more than four months of jockeying over the top spot in Germany’s hospital market.

Fresenius doesn’t plan to submit a renewed offer for the time being, the Bad Homburg-based company said in a statement today. The company now holds 5 percent of Rhoen-Klinikum plus one share, Fresenius executives said in a conference call today.

Fresenius was concerned that a renewed attempt would be complicated by rivals such as Asklepios Kliniken GmbH, which had also purchased stakes in the target, as well as by risks tied to gaining control of Rhoen’s supervisory board, people familiar with the situation said yesterday. Buying Rhoen-Klinikum would have cemented the bigger company’s position in Germany’s private-hospital market as acquisition opportunities dwindle.

“Blocking our attempt seems to be the name of the game,” Ulf Mark Schneider, Fresenius’s chief executive officer, told analysts, adding that none of the parties that undermined Fresenius’s offer proposed a “meaningful and constructive” alternative. “We considered this unfair not only to us, but also to Rhoen, the true pioneer of the German hospital market, which clearly deserved better than this.”

‘Sheer Desire’

“We decided that our responsibilities and reputations as good stewards and guardians of your capital were more important than the sheer desire to ram this through and teach some of our adversaries a lesson,” Schneider said.

Rhoen-Klinikum slumped 21 percent to 14.985 euros in Frankfurt trading, the biggest drop since at least October 1998. Fresenius rose 2.4 percent to 86.87 euros.

With other hospital companies as shareholders, “Rhoen- Klinikum, as a competitor, has been materially weakened,” Volker Braun, an analyst at Commerzbank in Frankfurt, wrote in a report today. “Management’s degree of freedom to operate has been reduced.”

Rhoen-Klinikum regrets Fresenius’s decision, the Bad Neustadt an der Saale-based company said in a separate statement today.

“The management board continues to consider it logical from the strategic point of view to merge two private clinic operators in Germany,” Rhoen-Klinikum said in the statement.

Offer Failed

Fresenius’s previous 3.1 billion-euro ($3.9 billion) bid failed to win enough shareholder support after another German hospital chain, Asklepios Kliniken GmbH, bought 5 percent of Rhoen-Klinikum’s shares the day the offer ended on June 27.

B. Braun Holding GmbH, a Melsungen, Germany-based supplier of medical products to hospitals, entered the fray by buying a 5 percent stake in Rhoen-Klinikum last week, complicating considerations by Fresenius of mounting a second attempt.

A takeover bid from Asklepios is unlikely because Fresenius would block it and the combination would have too high a ratio of debt to earnings, said Moritz Dullinger, an analyst at Kepler Capital Markets in Zurich.

“We believe Asklepios will stick to the minority stake and ensure Rhoen will stay independent,” he wrote in an e-mail.

About 84 percent of Rhoen-Klinikum’s stock was tendered in the original offer. The 22.50-euro-a-share bid was contingent on winning at least 90 percent of the stock at the time.

Fresenius had weighed the possibility of purchasing a simple majority of Rhoen shares in a revived bid, people familiar with the situation said last week. Fresenius had originally aimed to make a decision by the end of August.

“Why did it take us so long?” Schneider said on today’s conference call. “Let me assure you the answer is not our summer vacations. We have seen very little of that this year.”

Fresenius needed time to study possible alternative ways to structure the takeover, he said.

Fresenius’s Helios unit took the lead in the German hospital-management industry with the takeover of Damp Group in March. Rhoen ranks second by revenue while closely held Asklepios places third.

To contact the reporters on this story: Naomi Kresge in Berlin at nkresge@bloomberg.net; Aaron Kirchfeld in London at akirchfeld@bloomberg.net; Matthew Campbell in London at mcampbell39@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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