Elliott Management Going After German Drugmaker Stada

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Elliott Management Going After German Drugmaker Stada

Elliott Management’s merger arbitrage strategy in Europe has claimed new victims, with private equity firms Bain Capital and Cinven launching an improved offer to gain control of German drugmaker Stada.

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On Sunday, the two bidders announced that they would pay 74.40 euros to acquire the stock held by minority shareholders –  a premium of 12.3% over the price of a previous tender offer which allowed them to seize control of 63% of the company’s outstanding shares last month.

With its 15% stake in the drugmaker, Elliott was blocking Bain and Cinven’s attempt to reach the 75% threshold, which would allow them to strike a so-called domination agreement with the drugmaker, put their hands on its cash flow and use it to service the debt raised to finance the buyout offer.

The improved offer likely concludes a saga started 14 months ago, when activist Wyser-Pratte Management started pushing for a sale of Stada amid a proxy contest launched by Luxembourg-based activist Active Ownership Capital (AOC), which eventually won a seat on the board.

Both AOC and Wyser-Pratte have already sold their stakes in Stada, missing out on the improved offer now made by Bain and Cinven.

Short update

Carson Block's Muddy Waters Capital has revealed it has a small short position in troubled U.S. lender Banc of California. The short seller did not provide much detail on its thesis, although it described the company as a “dodgy” bank. Shares in Banc of California slumped as much as 29% in October last year after short seller Aurelius published a report accusing it of having ties with a fraudster. However, the stock price has since more than recovered amid pressure from long-side activists for changes at the top.

In March, the company agreed to appoint new board members to settle a proxy contest launched by Legion Partners Asset Management – in tandem with CalSTRS – earlier this year. PL Capital is also invested in the company, and started agitating for changes shortly after the publication of Aurelius’ report, eventually obtaining a director seat. Banc of California's former CEO Steven Sugarman and former lead independent director Chad Brownstein, who were accused by Aurelius of having ties to Jason Galanis, a convicted fraudster, resigned in January and February respectively.

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