Cinven, Bain hit ‘significant setback’ on Stada mega-deal

The firms failed to secure enough shareholder acceptances to complete the €5.3bn deal, which would have been the largest European private equity transactions this year.

Bain Capital and Cinven’s €5.3 billion takeover offer for Frankfurt-listed Stada, Germany’s largest generic drugmaker, has fallen through after the bid failed to gain enough shareholder acceptances.

The takeover offer of €66 per share was accepted by holders of 65.5 percent of shares, 2 percent short of the 67.5 percent threshold.

In a statement, Bain Capital and Cinven said the minimum acceptance threshold was “narrowly missed despite a highly attractive offer price”, recommendations from the company’s management and supervisory boards, and “a concerted shareholder outreach” by the two firms and Stada. The pair added they worked “very closely and constructively” with the company’s management and supervisory boards.

In April, Stada accepted Bain Capital and Cinven’s offer for all outstanding shares of the company, which represented a 48.9 percent premium over the closing price of 9 December 2016, the last day of trading prior to the first takeover rumours, as reported by Private Equity International.

At that point, the minimum acceptance threshold was 75 percent, which was reduced to 67.5 percent on 7 June, according to a statement on Stada’s website.

In a flash note yesterday, Jefferies analyst James Vane-Tempest wrote the firm was “perplexed” as to why Stada investors did not accept the offer, and called the deal’s collapse a “significant setback”.

“We had viewed a €66 deal as a great deal to shareholders when it was announced and recommended investors take the offer,” he wrote. “We had previously valued a best case offer at €65 so are therefore very surprised that the deal hasn’t won enough shareholder support.”

Jefferies has a “hold” rating on Stada shares, which as at 11:31 am today were trading at €60.42 per share.

In the statement, Matthias Wiedenfels, chairman of the executive board of Stada, said the board regarded the outcome as “a mark of confidence in Stada’s abilities”.

“We respect the close vote of our shareholders and understand it as a mandate to press ahead with our successful growth strategy,” he said.

Stada said the collapse of the takeover offer “will have no effect on the growth targets for the current financial year”, with expected group sales adjusted for currency and portfolio effects of between €2.28 billion and €2.35 billion, adjusted EBITDA of between €430 million and €450 million, and adjusted net income of between €195 million and €205 million.

The first half of the year has seen a surge in €1 billion-plus deals in Germany, according to data from the Centre for Management Buyout Research at Imperial College Business School published this week.

Germany recorded €8.5 billion in deal value for the first half of the year, buoyed by four such transactions, including the €2 billion sale of Xella by PAI Partners and investment funds managed by Goldman Sachs’ merchant banking division.

Last year, 95 buyouts were completed in Germany, the highest number since 2008. Its market is now on track to approach that volume again this year, as reported by PEI.

“The long-awaited hype over the German market may at last be materialising, as it’s not just a case of large deals skewing numbers, but also a larger number of mid-market deals too,” Callum Bell, head of corporate & acquisition finance at Investec, which co-sponsored the CMBOR research with Equistone Partners Europe, said in a statement.