Fresenius Fails to Meet Goal of Deciding on Rhoen-Klinikum

Fresenius SE failed to meet a goal of deciding whether to revive a 3.1-billion-euro ($3.9 billion) offer for German hospital operator Rhoen-Klinikum AG this month as both sides blamed each other for stalling the deal.

Fresenius has no plan to make an announcement today or over the weekend about Rhoen, said a person close to Bad Homburg, Germany-based Fresenius who declined to be identified because the matter is confidential. Asklepios Kliniken GmbH, the hospital company that blocked the earlier offer by taking a stake in Rhoen, complicated the matter by asking Germany’s antitrust regulator for permission to increase its holding.

The jockeying reflects the battle for supremacy in the German market for private hospitals. Fresenius’s Helios unit took the lead with the takeover of Damp Group in March. Rhoen ranks second by revenue, while Asklepios places third. Asklepios is concerned the deal would limit competition and hurt business and bought its stake to make the takeover more difficult, a person close to the company said.

“Right now it’s a pretty difficult situation because there are so many parties involved,” Moritz Dullinger, a Zurich-based analyst for Kepler Capital Markets, said by phone. “It is a deadlock situation.” He has a reduce rating on Rhoen’s stock.

Rhoen rose 0.5 percent to close at 18.95 euros in Frankfurt. The stock has dropped 14 percent from its peak this year after Fresenius’s previous bid failed. Fresenius climbed 1.1 percent to 84.82 euros.

Asklepios asked the German cartel office whether it’s allowed to increase its stake in Rhoen-Klinikum to more than 10 percent, Rudi Schmidt, a spokesman for the company, said by phone today. Spokespeople for Fresenius and Rhoen declined to comment.

Failed Bid

In April, Fresenius offered to buy all outstanding Rhoen shares at 22.50 euros each. The tender offer was contingent on holders tendering 90 percent of the stock plus one share, the ownership level required in Rhoen’s bylaws to achieve a complete merger. Asklepios, a closely held company based in Koenigstein, Germany, announced June 27 it had acquired a 5 percent stake, and two days later Fresenius said the bid failed because only 84 percent of Rhoen shares had been tendered.

B. Braun Holding GmbH, a Melsungen, Germany-based company that supplies medical products to hospitals, further thickened the plot by buying a 5 percent stake in Rhoen this week.

“They have a very good relationship with Asklepios,” Dullinger said. And because B. Braun and Asklepios are closely held, they have more leeway to act, he said. Asklepios’s only shareholder is its founder, Bernard Broermann.

New Offer

Meanwhile, people close to Fresenius and Rhoen-Klinikum each said the companies support a new bid, pointing toward the other party for the hold-up.

Now, Fresenius is leaning toward a new offer under which it would need 50 percent plus one share to complete the deal, two people with knowledge of the company’s deliberations, who declined to be identified because the matter is confidential, said this week.

Rhoen’s 10 supervisory board members representing shareholders have agreed to step down to make room for Fresenius executives if the deal goes through, according to two people close to Rhoen. Another person, who also declined to be identified, said some of the board members pledged to step down only if certain conditions were met, demands which the Fresenius side is unwilling to meet, and therefore a new offer has yet to be made.

A new offer may be held up because some members of Fresenius’s supervisory board may be concerned about the risks related to controlling only 50 percent plus one share of Rhoen and the attempts by B. Braun and Asklepios to block the deal, said two of the people. Two other people close to Fresenius said the would-be acquirer’s supervisory board is unified about pursuing the purchase and isn’t holding up the deal.

Adding to Earnings

Fresenius said Aug. 9 it expected to announce by the end of August whether it would revive the offer.

The acquisition may still go through, though there are many scenarios that could play out, Justin Smith, an analyst at Societe Generale, wrote in a report dated yesterday. Buying 50 percent plus one share of Rhoen would add to Fresenius’s earnings, he wrote.

Asklepios is seeking a minority stake in Rhoen-Klinikum, Kay Weidner, a spokesman for the German cartel office, said by phone today. Weidner declined to comment in more detail.

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