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Bain, Cinven clinch 5.4b euro Stada deal in second push

[BERLIN] Private equity partners Bain Capital and Cinven succeeded in their renewed bid to acquire Germany's Stada Arzneimittel AG for 5.4 billion euros (S$8.6 billion) in a takeover quest that has spanned months and at times looked doomed to fail. 

The suitors cleared the 63 per cent threshold set for the bid to go through, Stada said in a statement on Friday. All antitrust approvals have been secured, and the tendered shares will be transferred before the end of the month, the Bad Vilbel-based drugmaker said. Bloomberg reported that the offer had succeeded earlier, sending the stock to a record.

The move marks a major step forward in a deal that came down to the wire more than once, with an initial bid narrowly missing getting enough investors' support in June.

Elliott Management Corp, which kept other investors on tenterhooks about its intentions, signaled its willingness to support the private equity duo just before the Aug 16 deadline for shareholders' commitments ended on the new bid, people with knowledge of the matter said.

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The revised threshold, set at a lower level, appeared to be still too high as fewer retail investors than anticipated showed their support during the European holiday season.

Meeting the required target may also not spell the end of the road for the buyers. The successful offer means Bain and Cinven will likely have to pay out again, above the 66.25 euro-a-share offer, to gain control over the holdouts. The companies will need stock representing 75 per cent of voting shares to strike a so-called domination agreement, necessary to exert wide-ranging control over the drugmaker and tap its cash flows.

Shares of Stada jumped 12 per cent to 71.85 euros as of 1.34 pm after earlier climbing to its highest ever in Frankfurt trading. The stock has almost doubled since April 2016 amid speculation that the company may be acquired.

"We are pleased that the question of the future ownership structure has now been settled," said Engelbert Coster Tjeenk Willink, chief executive of the drugmaker. "Stada will now once again be able to fully concentrate on the operating business."

The drugmaker isn't the only European company whose fate has been under the sway of billionaire Paul Singer's investment vehicle in recent months.

On Wednesday, Elliott said it boosted its holding in the London-traded shares of BHP Billiton Ltd to 5 per cent from 4.1 per cent in April, adding pressure on the world's biggest mining company to enhance returns. Hours later, the hedge fund and Akzo Nobel NV agreed to end their legal confrontation after the Dutch chemicals and paint giant after months of bickering over strategic direction.

With Stada, Mr Singer began amassing a stake amid signals that Bain and Cinven's first bid would fail. Elliott had accumulated 8.69 per cent of the shares by early July, according to regulatory filings.

But the takeover effort had become a complicated affair well before that for the two private equity firms.

Stada, unlike rivals, had eluded a takeover for years thanks to an unusual shareholder structure and entrenched management. That changed last year when Active Ownership Capital Sarl led a shareholder revolt in May 2016, and ultimately succeeded in overthrowing a rule that they said gave Stada's board undue influence over ownership of the company. Last August, former chief executive officer Hartmut Retzlaff also resigned after more than two decades at the helm, paving the way for change.

The moves precipitated a fierce bidding war earlier this year, with a competing offer from a consortium comprised of Advent International Corp and Permira, according to people with knowledge of the matter. China's Shanghai Pharmaceuticals Holding Co and private equity peer CVC Capital Partners also considered bids, people said at that time.

Bain and Cinven triumphed, only to have investors reject their original offer by a slim margin in June even after the threshold for shareholder participation was cut and the deadline was extended. The suitors quickly submitted a second bid, offering more money and lowering the support target yet again, in July.

The new bid, up from the previous offer of 66 euros a share, represented a premium of nearly 50 per cent from Stada's share price in December.

That takeover attempt ultimately prevailed after the drugmaker's management, the two private equity firms and their advisers made repeated appeals to investors, and particularly to hedge funds, in recent days to accept the offer.