As per reports from various news agencies, McKesson Corporation's (MCK) proposed acquisition of Germany-based drug distribution company Celesio is in jeopardy.
It was recently reported that hedge fund, Elliot International, which holds approximately 25% of shares in Celesio feels the offer price of €23 per share grossly undervalues Celesio's worth. It expects McKesson to increase its offer price in order to gain full operational control.
We remind investors that McKesson announced in Oct 2013 it has signed an agreement with Franz Haniel & Cie. GmbH, the largest shareholder in Celesio, to acquire a majority stake in Celesio for approximately €23 per share or $8.3 billion. Under the terms of a share purchase agreement, McKesson has agreed to acquire Franz Haniel & Cie. GmbH’s stake in Celesio, which currently represents 50.01% of the total outstanding shares of the company.
However, the acquisition is conditional upon regulatory approvals and the acquisition of a 75% stake in Celesio by McKesson.
Last week, McKesson launched a public takeover offer for the outstanding shares of Celesio.
The company also launched tender offers for the outstanding convertible bonds of Celesio at a price corresponding to the value of the underlying shares implied by the offer price of €23 per share.
Celesio provides logistics and services in the pharmaceutical and healthcare sector with operations in approximately 14 countries. We are positive on the Celesio acquisition. The potential acquisition, if it goes through, will allow McKesson to gain a foothold in Europe, thereby geographically expanding its core operations further.
However, with Elliot International offering resistance to the deal, the acquisition might not go through.
We expect investor focus on to remain on further updates on the Celesio acquisition.
McKesson currently carries a Zacks Rank #1 (Strong Buy). Other stocks that currently look attractive include Cardinal Health (CAH), Align Technology Inc. (ALGN) and Herbalife Ltd. (HLF). While Cardinal Health and Herbalife carry a Zacks Rank #2 (Buy), Align Technology is a Zacks Rank #1.
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