Stada’s Independence in the Crosshairs on Buyout Speculation

  • Company said to have attracted attention from PE firms
  • Drugmaker’s stock has climbed almost 20 percent since May

Stada Arzneimittel AG’s time as an independent drugmaker selling copies of medicines like Viagra may be drawing to a close.

The German company has attracted interest from several private equity firms including Permira, CVC Capital Partners and Bain Capital, according to people familiar with the matter. Buyout firms have been studying the feasibility of a takeover with potential advisers, though deliberations are at an early stage, the people said, asking not to be identified as the discussions are confidential. Rival generics companies have also informally looked at Stada, the people said.

Speculation regarding a takeover mounted this year after an activist investor successfully campaigned to overthrow a rule it said gave Stada’s board undue influence over ownership of the Bad Vilbel-based company, and helped usher in new independent directors. The unexpected departure of Chief Executive Officer Hartmut Retzlaff in June, after more than two decades at the helm, also made Stada appear even more appealing amidst an industry-wide wave of consolidation.

But while Stada is working with its long-time adviser Perella Weinberg Partners LP on strategy, the German company isn’t running a sales process and is currently more focused on improving operations, the people said. The drugmaker is open to playing a role in the industry’s consolidation, one of the people said.

Stada declined to comment for this story.

Stock Gains

“We will concentrate on growth,” Matthias Wiedenfels, who took over as the drugmaker’s CEO from Retzlaff, told reporters in November. “Independence is not a goal in itself.”

Wiedenfels at that time refused to comment on whether the company has held talks with potential buyers or whether it’s big enough to survive on its own.

Representatives for Permira and CVC also declined to comment. Bain didn’t return calls seeking comment.

Media reports about the interest in Stada have propelled its stock up almost 20 percent since early May, when Active Ownership Capital Sarl’s stake in the company and demands for change became public. That’s boosted the drugmaker’s market value to 2.8 billion euros ($2.9 billion). The shares jumped almost 4 percent to 46.065 euros on Monday.

2019 Goals

The drugmaker in October reiterated plans to boost revenue to 2.6 billion euros by 2019, up 23 percent from the 2.11 billion euros generated last year, as both its branded medicines and cheaper copycat drugs expand sales. Profit excluding some costs were projected to gain 50 percent to 250 million euros as the company pares expenses.

Potential buyers see opportunities to improve profit margins and operational efficiency as well as reap savings through a combination with other generic companies, people with knowledge of the matter said. Some of the buyout firms have been struggling to come up with a takeover offer and financing package that would make Stada an attractive investment, the people said.

Stada would give buyers access to Russian and German markets for over-the-counter and copycat drugs. The company has two divisions -- branded products and generics -- and is known for medicines such as Grippostad, to treat the common cold, and pain relief treatment tilidine naloxone. Its biggest pharmaceutical drug is APO-go, used in the care of patients with Parkinson’s disease, which generated 63 million euros in sales last year.

An acquisition of Stada would add to a string of deals in the generics industry. 

Narrowing Field

Israel’s Teva Pharmaceutical Industries Ltd. acquired the division that makes copycat medicines from Allergan Plc this year for $40.5 billion to once again become the world’s biggest maker of generic drugs. Meanwhile Mylan NV, rebuffed by Perrigo Co., bought Sweden’s Meda AB for $7.2 billion this year. Switzerland’s Novartis AG has also said it could spend up to $5 billion for bolt-on acquisitions including assets to strengthen its Sandoz division, which is currently the world’s second-largest maker of copycat drugs.

Active Ownership, an investment company that buys minority stakes in undervalued publicly traded companies in Germany, Austria, Switzerland and Scandinavia, this year amassed a 7 percent stake in Stada, making it the company’s largest investor.

Under pressure from Active Ownership, Stada replaced three board members and named a new chairman. It also ended a restriction on the transfer of some shares, which until then could only change hands with the board’s consent.

Still, the activist investor continues to apply pressure on the company. Most recently, it filed a lawsuit in Frankfurt alleging that the election of two people to the board in August was in suspicious circumstances.

“We continue to be convinced of the significant operational improvement potential at Stada,” Klaus Roehrig, founder and partner of Active Ownership, said in a statement on Friday.

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