Elliot Accepts McKesson’s Higher Offer For Celesio

Paul Singer
By World Economic Forum (Flickr: The Global Financial Context: Paul Singer) [CC BY-SA 2.0], via Wikimedia Commons

Elliot Management Corporation, the hedge fund controlled by billionaire Paul Singer, accepted the higher offer of McKesson Corporation (NYSE:MCK) for Celesio AG (ETR:CLS1) (FRA:CLS1), a German pharmaceutical wholesaler.

The hedge fund entered into an agreement with McKesson Corporation (NYSE:MCK) to acquire its convertible bonds in the German pharmaceutical wholesaler. McKesson said the closing of the acquisition of Elliot’s convertible bonds is subject to the completion of takeover and tender offers for Celesio AG (ETR:CLS1) (FRA:CLS1).

Yesterday, Elliot stated that it would take part in the sweetened proposal of the largest pharmaceutical company in the United States to the German pharmaceutical wholesaler.

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Last month, the hedge fund rejected the proposed acquisition price of McKesson Corporation (NYSE:MCK) stating that bond holders and shareholders are not getting a fair deal. In other words, the tender offer “substantially undervalued” Celesio AG (ETR:CLS1) (FRA:CLS1). Elliot emphasized that the U.S. based pharmaceutical company 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 merged company.

Increased offer accepted by Elliot

In response, McKesson Corporation (NYSE:MCK) increased its takeover offer for Celesio AG (ETR:CLS1) (FRA:CLS1) to €23.50 from €23 per share.  According to the U.S. based pharmaceutical company, the current price is its “best and final offer.” The deadline to accept its final offer was Thursday at midnight.

McKesson Corporation (NYSE:MCK) said suggested that all shareholders and bondholders who have not tendered to date do so because its takeover and tender offers will expire if the 75% condition is not met. According to the company, there will be no additional acceptance period if the 75% condition is not met on the set deadline. However, if the condition was met, there will be an additional acceptance period on January 16-29, 2014.

Largest pharmaceutical wholesaler

The merger of McKesson Corporation (NYSE:MCK) and Celesio AG will create the largest pharmaceutical wholesaler and provider of logistics and services for the health care sector worldwide. The combine company is estimated to generate annual revenue of more than $150 billion with approximately 81,500 employees globally.

Shares of McKesson Corporation (NYSE:MCK) are trading at about $174.83 per share, up by almost 3% at the time of this writing, around 11:47 AM in New York. On the other hand, the stock price of Celesio AG (ETR:CLS1) (FRA:CLS1) was down by 1.72% to €24.03 in Frankfurt, Germany.