Stada Says No to Private Equity – For Now


March 17, 2017

German pharmaceutical company Stada revealed on Thursday that it has rejected two competing private equity offers. However, the company is ready to strike a deal and has given both groups time to sweeten their bids.


Stada’s decision


In the official statement, the company said, “The Executive Board and the Supervisory Board Mutually agree that the indicative bids do not yet reflect the fundamental value of Stada.” The statement went on to say the company is looking for improved bids with an open mind.


Reports suggest Stada might be creating the delay in order to allow other private equity companies and strategic investors to enter the race for buying the company. According to Bloomberg, sources close to the company have told the company is currently “driving management to cut costs and raise profit guidance”. Furthermore, Stada’s chairman Carl-Ferdinand Oetker is reportedly urging top executives to “consider more aggressive steps to improve performance”. The delay is also linked with the possible interest from Shanghai Pharmaceuticals Holding, which is currently considering joining forces with private equity firm CVC Capital Partners. However, the German drug maker continues to deny the rumours of a conscious delay.


Its annual reports will be due next Thursday and the company has told its earning might be increasing by up to 11%. This would mean earnings close to €450 million.


Plenty of interest from private equity led groups


The Financial Times reported earlier this week on the two private equity offers. The first consortium consists of Advent International and Permira, with Bain Capital and Cinven teaming up to make the competing bid. Both were offering a plan to cover Stada’s dividend payment and a way to create an investment agreement to lay out promises for the company’s workforce and its growth strategy. The newspaper reported both deals to have been in the region of €58 a share.


But there are other interested parties in the mix and the price could climb up. As mentioned, Shanghai Pharmaceuticals Holding is currently seeking approval for a bid from the Chinese government. Singapore’s GIC Pte is also said to be looking to make an offer with Advent. So far, the representatives of the private equity firms have declined to comment the deal or their interest. Shanghai Pharmaceuticals has also previously denied expressing a formal intent to buy the German company.


The stock responded with the shares falling slightly in Frankfurt trading on Thursday. Stada’s stock has gained 16% this year, which currently gives it a market valuation of roughly €3.54 billion.


Stada could well be on the route to a better offer. Private equity firms are currently scouring for deals while sitting on a lot of available money. Therefore, the company’s decision to delay the bidding process and seek a higher valuation could work for its benefit.

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