The stock price of Celesio AG (ETR:CLS1) plunged more than 4% to €23.10 on Tuesday in Frankfurt after McKesson Corporation (NYSE:MCK) failed to gain enough support from shareholders for its bid to acquire the outstanding shares and convertible bonds of the German pharmaceutical wholesaler.
In a statement, John Hammergren, chairman and chief executive officer of McKesson Corporation (NYSE:MCK) said, “While we are disappointed that we were not successful in completing our offers for Celesio, we have a track record of great performance, a strong balance sheet and demonstrated leadership and scale across our markets.”
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Hammergren added that McKesson Corporation (NYSE:MCK) is well positioned and will continue to explore and evaluate opportunities to strengthen its businesses further through its disciplined approach to capital allocation.
McKesson joint venture with Celesio a possible alternative
During the JPMorgan Health Conference, Hammergen emphasized that McKesson Corporation (NYSE:MCK) is considering other strategies to strike a deal. He indicated the possibility of creating a joint venture with Celesio AG (ETR:CLS1).
“Clearly, a joint venture would be an alternative. We have been talking to Celesio for some time about various alternatives,” said Hammergen.
Shareholder’s support not enough
Hammergen was surprised that the bid did not win enough support from shareholders given the fact the activist hedge fund Elliot Management Corp supported it. He said, “This is fresh news to us. The best I can speculate is that people either forgot the tender date or they somehow believed that there is more on the other side of this.”
Last week, Elliot Management Corporation accepted McKesson Corporation’s (NYSE:MCK) higher offer to acquire Celesio AG (ETR:CLS1). The largest U.S. pharmaceutical company increased its bid for the German pharmaceutical wholesaler to €23.50 per share, its best and final offer.
Elliott previously rejected its €23 per share offer because it believed that the price substantially undervalued Celesio AG (CLS1), and McKesson Corporation (NYSE:MCK) has the ability to pay a fairer price under a deal that still greatly increase its earnings per share as early as the first year of operation of the combined company.
McKesson Corporation (NYSE:MCK) gained support from shareholders who collectively own 72.33% of the shares of Celesio AG (ETR:CLS1), slightly short of the 75% threshold to complete the transaction. In October, the U.S. pharmaceutical company agreed to acquire the 50% stake of Franz Haniel & Cie GmbH in the German pharmaceutical wholesaler for €23 per share, and decided to buy the remaining shares.