Bain and Cinven Stada Closes Private-Equity Deal

Germany's listed firm Stada is going private. The drug maker has ended negotiations with four private equity firms that were vying for its business, settling on a €4.1-billion acquisition bid by Boston-based Bain and London’s Cinven.
Stada has swallowed the takeover pill.

The waiting seems to have paid off. Stada, listed on the Frankfurt stock exchange and Germany's biggest maker of generic drugs, on Monday said it had agreed to be taken private after U.S. and British private equity firms Bain and Cinven raised their takeover bid from €3.5 billion to €4.1 billion, or $4.3 billion.

Since February, the mid-cap firm has resisted takeover approaches from the two investors, as well a rival bid from two other private equity firms – Advent and Permira – saying those offers of €58.72 per share, including dividends, were too low.

But after Bain and Cinven raised their price to €66 per Stada share and agreed to protect jobs and productions sites, Stada pledged support for the firms’ offer. Its stock had jumped more than 11 percent to €63.45 by noon local time in Frankfurt. One trader said the bid was “surprisingly high.”

The offer implies a multiple of 47 times Stada’s net profit last year and 23 times its adjusted operating profit, which excludes certain one-off cost items. Including debt, the offer is worth €5.3 billion, or 13 times last year’s earnings before interest, tax, depreciation and amortization. That puts its value a bit higher than those of its rivals, including Perrigo and Gedeon Richter.

“Our negotiating strategy over the last few weeks was very successful,” Carl Ferdinand Oetker, the Stada chairman, said in a statement.

Speaking to Handelsblatt, chief executive Matthias Wiedenfels said the offer price was not the only criterion for their choice: “We also obtained wide-ranging protections for our staff, while the investors are also completely supportive of our growth strategy.”

Mr. Oetker added: “We got this result because the Bain and Cinven believe in our staff, and so they were ready to make concessions.”

WTB Stada

Analysts see potential for Stada to grow its earnings. It is the biggest independent maker of generic drugs in Germany and its prescription-free products Grippostad and Ladival sun lotion have a strong market position.

“That is a growth market. Stada earns sustainable margins and has access to interesting markets, including Russia, Spain and Italy,” said Ulrich Huwald, analyst with Bank M.M. Warburg.

Stada has 10,000 employees worldwide, and is Germany’s largest remaining independent generic drugmaker.

The takeover comes after investment firm Active Ownership Capital, or AOC, bought a 5-percent stake in Stada last May and started pushing for a reorganization of the non-executive supervisory board. AOC had complained that Stada, with a 2016 revenue of €2.1 billion and €86 million in net profits, could be more profitable under new leadership. Stada’s chief executive and chairman resigned in August.

The last word on the takeover will ultimately lie with Stada shareholders, with Bain and Cinven needing to obtain 75 percent of shares to finalize the deal. This is thought to be a relative certainty. Over the last months, the stock has largely been bought up by investors with exactly this scenario in mind—a quick sale and a clear profit.

Speaking to Handelsblatt, Mr. Wiedenfels refused to be drawn on how long the private equity firm would hold onto Stada. “Bain and Cinven want to go with our growth strategy until at least 2021. But today is really not the time to engage in sales speculation.”

Siegfried Hofmann covers chemicals and pharmaceuticals for Handelsblatt. To contact the author: [email protected]