Photographer: Krisztian Bocsi/Bloomberg

Activist Fund Elliott Is Said to Build Stada Stake Amid Bids

  • Hedge fund said to own more than 5 percent of drugmaker
  • Elliott could tender shares to a potential acquirer of Stada

Activist hedge fund Elliott Management Corp. has built a stake in Stada Arzneimittel AG, adding another twist to a protracted takeover battle for the German maker of generic drugs, according to people familiar with the matter.

Elliott, led by Paul Singer, owns more than 5 percent of Stada and could disclose the stake as soon as this week, the people said, asking not to be identified because the details aren’t public. The hedge fund started buying Stada shares last week as a 5.3 billion-euro ($6.1 billion) tender offer for the company from private equity firms Bain Capital and Cinven started to unravel, the people said. A spokesman for Stada declined to comment.

Elliott is working on a structure that would see them tender their shares to a bidding consortium interested in acquiring Stada, the people said. Elliott would also offer to finance the takeover, allowing it to reap fees at the same time, they said. The structure, which is unprecedented in Germany, would allow a bidder to lower the acceptance threshold for the deal to as low as 50 percent, they said.

Elliott has reached out to buyout firms Advent International and Permira, which lost a bidding war against their peers. The fund may also float the idea with Bain and Cinven, which are close to making a new takeover offer to Stada management, people familiar with the matter have said.

Representatives for Elliott, Bain, Cinven, Permira and Advent declined to comment.

Elliott working together with Bain and Cinven would make the deal “a relatively safe thing,” said Timo Kuerschner, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart. “It’s certainly a sign that there could be a second try for the takeover.”

Stada rose 1.7 percent to 63.96 euros at 9:11 a.m. in Frankfurt, valuing the drugmaker at just under 4 billion euros.

Management Changes

Bain and Cinven said on June 26 that they received tenders for only 65 percent of Stada’s shares, short of the 67.5 percent hurdle needed for the deal to go ahead.

Since then, Stada has replaced its chief executive officer and chief financial officer with interim leaders through the end of the year.

It’s not the first time Elliott has gotten involved in a German takeover saga. The hedge fund played a key role when U.S. drug retailer McKesson Corp. acquired Stuttgart-based rival Celesio AG for about 4 billion euros in 2014.

Elliott amassed enough shares to block McKesson’s initial offer, but later helped get the deal done when it received a higher price from McKesson on a convertible bond it held in Celesio. Rival hedge fund Magnetar Financial LLC in May 2014 filed a lawsuit against McKesson, alleging the company should have paid all shareholders the same amount. A Frankfurt court ruled that McKesson had broken German law, according to a Wall Street Journal report.

Billionaire Singer founded Elliott in 1977. His firm oversees more than $32 billion, investing across strategies including long-short hedge funds, distressed credit, arbitrage, real estate, shareholder activism and private equity. Elliott’s current public campaigns include mining giant BHP Billiton Ltd., Dutch paintmaker Akzo Nobel NV and South Korean technology group Samsung Electronics Co.

— With assistance by Naomi Kresge, and Aaron Kirchfeld

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