McKesson, Elliott Agree on Celesio Offer at 23.50 Euros

The Headquarters of Celesio AG Stand in Stuttgart
The headquarters of Celesio AG stand in Stuttgart. Source: Celesio AG via Bloomberg

McKesson Corp. raised its bid for German drug distributor Celesio AG, winning support from U.S. hedge fund Elliott Management Corp., which opposed the original offer as too low.

McKesson will offer 23.50 euros a share, up from 23 euros previously, the San Francisco-based company said in a statement today. The company’s “best and final” tender offer, now valued at about 4 billion euros ($5.4 billion), expires at midnight Frankfurt time tonight, McKesson said.

The sweetened bid ends a stalemate that threatened to derail McKesson’s plan to expand in Europe. The acquisition may allow the U.S. company to buy as much as $10 billion a year in generic drugs for distribution, compared with $6 billion to $7 billion on its own. Celesio, based in Stuttgart, has 132 wholesale branches that supply 65,000 pharmacies and hospitals, mostly in 14 European countries.

“I think we can say this is a done deal,” Ulrich Huwald, an analyst at Warburg Research GmbH in Hamburg, said in a telephone interview today. “I think they’ll reach the 75 percent threshold.”

Elliott, the holder of more than 25 percent of Celesio voting rights, said in December it wouldn’t sell its shares to McKesson. The hedge fund said in an e-mailed statement today it would tender 4,866 convertible bonds and at least 27.2 million shares into the offer.

Haniel Stake

McKesson said Oct. 24 it agreed to buy the 50.01 percent stake in Celesio held by Franz Haniel & Cie GmbH, a family-owned investment company, for 23 euros a share, and begin a tender offer for the remaining publicly traded shares at the same price.

Since Walgreen Co.’s 2012 deal to buy 45 percent of Alliance Boots, the owner of the largest U.K. pharmacy chain, drug distributors have been examining their positions in Europe and looking at ways to cut costs.

Buying Celesio would be McKesson’s first deal in Europe, where governments have more control over drug prices, something that may be a challenge in certain countries, Chief Executive Officer John Hammergren said in October.

Celesio has struggled with cuts in U.K. government reimbursement and its failure to build Germany’s first pharmacy chain after the company’s 2007 purchase of the DocMorris mail-order drugstore. The unit was sold in 2012.

Celesio fell 1.6 percent to 24.10 euros in Frankfurt. The stock jumped to 24.50 euros yesterday on speculation McKesson would raise the offer to 25 euros. McKesson rose 3.3 percent to $175.33 at the close in New York, extending yesterday’s 4.9 percent gain.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE