McKesson Corporation (NYSE:MCK) announced late Thursday that it has gained the necessary 75% support to acquire its German counterpart Celesio AG (ETR:CLS1) (FRA:CLS1) (OTCMKTS:CAKFY). It’s the U.S. drug distributor’s second attempt to buy the German company, as it had previously failed to gain the necessary support required by German law. It will help the U.S. company negotiate better deals with large drug manufacturers, and strengthen its global footprint.
Elliott accepts McKesson’s increased offer
McKesson Corporation (NYSE:MCK) said that it would acquire the entire stakes of two of the largest Celesio AG (ETR:CLS1) (FRA:CLS1) (OTCMKTS:CAKFY) shareholders, Franz Haniel & Cie GmbH and Elliott Management. The San Francisco-based company is paying €23.50 a share, which values the German distributor at €6.23 billion ($8.4 billion) including debt. The deal also includes Elliott’s Celesio bonds that are convertible into shares, but McKesson didn’t reveal how much it is paying for the convertible bonds.
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McKesson Corporation (NYSE:MCK) made its initial offer in October last year at €23. But Elliott Management opposed the offer. Earlier this month, the U.S. drug distributor raised its bid to €23.50 per share to convince Elliott. But a big problem was that the combined stake of Haniel and Elliott Management didn’t reach the 75% threshold.
How McKesson reached the 75% threshold
Regulatory filings showed on January 13 that Haniel owned 41.8% stake in Celesio AG (ETR:CLS1) (FRA:CLS1) (OTCMKTS:CAKFY), while Elliott Management’s shares and convertible bonds equaled 26.7% of the German distributor’s fully diluted equity capital. That was still 6.5% short of the 75% threshold. But if you consider only equity capital, Haniel owned 50.01% stake, and Elliott Management held another 24.08%.
Sources told Reuters yesterday that Celesio AG’s largest shareholder Haniel persuaded Elliott Management to salvage the takeover by McKesson Corporation (NYSE:MCK). The U.S. hedge fund agreed and increased its stake in Celesio, so that the two shareholders had enough shares to sign the deal with McKesson.
McKesson Corporation (NYSE:MCK) said it will finance a part of the deal with cash, and already has a bridge financing facility to fund the remaining amount. The U.S. drug distributor expects to Celesio AG (ETR:CLS1) (FRA:CLS1) (OTCMKTS:CAKFY) to add $1-$1.20 to its earnings in the first full year after closing the deal.
McKesson Corporation (NYSE:MCK) shares jumped 3.15% in pre-market trading to $177.80 on Friday.