McKesson, Elliott Said in Talks on Celesio Stalemate

McKesson Corp. and hedge fund Elliott Management Corp. are discussing options including a possible increase in McKesson’s offer for drug distributor Celesio AG to overcome Elliott’s opposition to the deal, three people familiar with the matter said.

No final decision has been made and the talks may not lead to an agreement on the 3.9 billion-euro ($5.3 billion) offer, though, said the people, who asked not to be identified because the process is confidential. Celesio shares rose the most in almost four years.

McKesson, based in San Francisco, 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. McKesson’s offer is conditional on support from stockholders representing 75 percent of Stuttgart, Germany-based Celesio’s stock.

Elliott, the U.S. hedge fund run by Paul Singer, said Dec. 10 the offer undervalues Celesio and the firm won’t tender its shares. Elliott holds more than 25 percent of the voting rights in Celesio.

Shareholders have until midnight Frankfurt time tomorrow to tender stock in the offer. McKesson would have to file a new offer by midnight tonight if the company wants to get an extension of the acceptance deadline by two weeks, according to German takeover law.

Celesio rose 9.3 percent to close at 24.50 euros in Frankfurt, the biggest gain since May 4, 2010. McKesson climbed 4.9 percent to close at $169.81 in New York, the biggest single-day gain since July 26.

Reuters reported the talks earlier today. Dow Jones, citing a person briefed on the matter, reported today that McKesson might be willing to pay around 25 euros a share.

A spokesman for Elliott declined to comment. Calls and an e-mail to McKesson weren’t returned. A spokesman for Celesio couldn’t immediately be reached for comment.

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