Lundbeck 70% Holder Makes Bid Unlikely After Stock Plunge

H. Lundbeck A/S (LUN), the Danish drugmaker with as many as three new products reaching the market over the next year and a stock price at a 13-year low, should be takeover bait for bigger pharmaceutical companies. Majority ownership by a single shareholder makes that unlikely.

Lundbeck, based in Copenhagen, yesterday reduced its sales and profit forecasts for the next two years. The stock plunged the most in more than three years.

The Lundbeck Foundation, which supports research in medical and natural sciences, owns 70 percent of Lundbeck and would need to approve any takeover bids if the company were to be approached. Under its statute, which states that the foundation will act “in the best interest of the company,” that is unlikely to happen, said Bertil From, the foundation’s chief financial officer.

“Until now, it has been interpreted as, we should continue to be the majority shareholder of the company; that’s also the case now,” From said in a telephone interview. “They have the best pipeline ever, and we are here to support the company to get the most value out of it.”

The foundation’s control means that Lundbeck will be spared the fate of Genzyme Corp. and Illumina Inc., which were the subjects of hostile takeover offers after their shares plunged. Paris-based Sanofi acquired Genzyme for $20.1 billion last year, while Basel, Switzerland-based Roche Holding AG walked away from Illumina this year after failing to win support from the San Diego-based company’s shareholders.

‘No Discussion’

The foundation’s board of trustees has the right to decide to sell the company, From said. Still, “there is no discussion about that,” he said.

Any takeover approaches for Lundbeck would first be vetted by the drugmaker’s board of directors, and if they recommend an offer, the foundation would then evaluate it, From said.

Simon Augustesen, a spokesman for the Copenhagen-based company, declined to comment on whether Lundbeck has received any takeover offers.

Grete Lundbeck, the widow of company founder Hans Lundbeck, established the foundation in 1954 “to maintain and expand the activities” of the company, and to provide funding for scientific research, according to its website. The foundation owns 34 percent of ALK-Abello A/S (ALKB), a maker of allergy vaccines, and 36 percent of ambulance-services provider Falck A/S, and manages Lundbeckfond Ventures, a life-sciences venture-capital investor.

Carlsberg, Novo

The ability to sell the stake in Lundbeck is unusual among foundations with controlling stakes in Danish companies, said Caspar Rose, a professor of law and business at Copenhagen Business School’s Center for Corporate Governance. Still, it’s “very unlikely” the Lundbeck Foundation would sell, he said.

“I would not say Lundbeck is a potential target for anyone,” Rose said in a phone interview. “Lundbeck needs to be in much more serious difficulties before it’s relevant for the foundation board to determine whether it should try to merge Lundbeck with a larger firm.”

Beermaker Carlsberg A/S and drugmaker Novo Nordisk A/S are among the Danish companies with foundations as controlling shareholders.

In cutting its forecasts, Lundbeck cited higher costs for product research and marketing and generic competition for older drugs. The stock dropped 15 percent to close at 82.15 kroner, giving the company a market value of 16.1 billion kroner ($2.9 billion). Yesterday’s drop was the biggest since June 8, 2009, and the closing price was the lowest since Feb. 4, 2000.

The lower sales and profit forecasts won’t change the foundation’s mindset over its ownership, which is an advantage for Lundbeck, Rose said.

“They have sufficient power to not overreact, compared with a company that has highly dispersed ownership,” he said.

To contact the reporters on this story: Makiko Kitamura in London at mkitamura1@bloomberg.net

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

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