Photographer: Krisztian Bocsi/Bloomberg

Stada Investor ‘Shenanigans’ Risk Derailing Deal For Second Time

  • Buyout firms need 63% of shares by Aug. 16 for bid to succeed
  • Offer is their second attempt after an initial bid failed

Stada Arzneimittel AG’s takeover by two private-equity suitors risks falling apart a second time in as many months unless investors shake off their complacency and tender more shares ahead of a make-or-break deadline next week, the bidders’ proxy adviser said.

“There are a significant number of rumors and Chinese whispers circulating” about the volume of shares that need to be submitted, solicitation firm Georgeson said in an email sent to investors Thursday that was seen by Bloomberg. “A reduced number of acceptances this time round (given the summer holidays), the high number of passive holders that will do little or nothing and the excessive levels of borrow for your fancy back-end shenanigans leaves little room for error.”

Bain Capital and Cinven’s second attempt to buy German drugmaker Stada Arzneimittel AG has been accepted by investors representing 31 percent of the shares with a week to go until the offer’s deadline, the buyout firms said in a statement on Thursday. The bidders need 63 percent of shares by midnight Frankfurt time on Aug. 16 for the deal to be successful. The companies’ first offer failed in June after missing the initial threshold by just two percent.

Many investors wait until the final days of an offer before tendering their stock. Representatives for Georgeson, Stada, Bain and Cinven declined to comment.

Ad Campaign

Stada shareholders have been offered 66.25 euros a share, or about 5.4 billion euros ($6.3 billion), for the Bad Vilbel, Germany-based generic drug company after a protracted bidding war. The new bid, up from the previous offer of 66 euros a share, represents a premium of nearly 50 percent from Stada’s share price in December before takeover talk surfaced.

About 16 percent of retail investors refused to sell their shares in the first offer, an unusually high amount, and index-tracking funds, controlling another 10 percent, only tender shares after the bid is successful and enters an extended offer period, people familiar with the matter have said. That put more than a quarter of Stada’s shares out of reach.

To rally shareholders this time, Bain and Cinven have bought online ads targeting retail investors, playing messages warning them to tender by the deadline on sites such as Apotheke Adhoc, a German online news service for pharmacists.

‘Risk of Failure’

Adding another twist, activist hedge fund Elliott Management Corp. has built a stake in Stada. The hedge fund, led by Paul Singer, started buying Stada shares as the initial tender offer for the company started to unravel, people familiar with the matter said in July.

Stada Chief Executive Officer Engelbert Coster Tjeenk Willink also urged shareholders to tender in a letter this week, saying a fight to preserve the company’s independence would be a mistake, leaving the company vulnerable to a hostile takeover or breakup.

“If you don’t do this and continue to rely on your peers to tender into the offer rather than you doing your part this deal continues to be at significant risk of failure,” Georgeson’s letter said. “It was your conviction in the trade that got you to this point now make the deal happen, don’t be passive investors.”

— With assistance by Naomi Kresge

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