LONDON - The hedge fund Elliott Management said on Tuesday that McKesson Corporation’s offer to acquire Celesio “substantially undervalues†the German pharmaceutical wholesaler.
In October, McKesson, the San Francisco health care services company, announced that it had acquired a controlling stake in Celesio from Franz Haniel & Cie., the company’s majority shareholder, and planned to start a tender offer for the remaining shares in a deal valued at $8.3 billion.
But Elliott, which has an economic interest in Celesio of more than 25 percent, says it does not plan to tender the shares or convertible bonds owned by its affiliated funds.
“Simply put, Elliott believes that Celesio’s shareholders and bondholders are not getting a fair deal at the current price,†the hedge fund said. “Given the value McKesson stands to gain from the substantial realizable economies of scale, Elliott believes the price offered fails to appropriately compensate Celesio shareholders and bondholders for this upside potential.â€
The deal would create one of the world’s largest pharmaceutical wholesalers and providers of logistics and services in the health care sector, with annual revenue of more than $150 billion and about 81,500 employees worldwide. The combined company would operate in 20 countries.
Both companies act as distributors providing generic, branded and over-the-counter drugs to pharmacy chains, independent pharmacists and institutions, such as hospitals. Celesio also operates Lloyds, a British pharmacy chain.
On Tuesday, Elliott said that it believed that McKesson could afford to pay a “fairer†price to shareholders and bondholders and still have a deal that would be highly accretive as early as the first year of the combined company.
Elliott noted that McKesson’s market value has increased by about $7.7 billion since word of a possible deal emerged in October. The hedge fund also noted that stock prices have increased significantly since that time, cutting into the premium offered by the deal.
The hedge fund said there might be other ways to maximize value for shareholders and bondholders, such as selling the wholesale business to one bidder and the Lloyds pharmacy chain to another buyer.
“Even on a standalone basis, Celesio has been a company on the mend for some time now, and a turnaround was underway long before McKesson came in with its offer,†Elliott said.
In afternoon trading in Frankfurt, shares of Celeision were down more than 1 percent.
