Bain, Cinven pay up to win backing for Stada deal: Reuters

Buyout groups Bain Capital and Cinven won an auction for German drugmaker Stada (STAGn.DE) on Monday after a surprisingly large increase on a previous bid valued the company at about 5.3 billion euros ($5.6 billion).

The private equity consortium is offering 65.28 euros per share and a dividend of 0.72 euro per Stada share, the company said in a statement on Monday, earning the backing of Stada management.

Bain and Cinven had been vying with a rival consortium comprising Advent and Permira for control of generic drugmaker Stada. Both suitors had previously made takeover offers at 58 euros per share, which valued the company at 4.7 billion euros including debt.

Stada said the improved offer valued it at 12.3 times its expected 2017 earnings before interest, taxes, depreciation and amortization (EBITDA), above trading multiples among its peer group of 9-11 times.

It carried a premium of 49 percent over the Dec. 9 share price, before the first report of a takeover approach, it added.

Sources had said last week that final bids were due late on Friday and would not go far above previous levels because it was already seen as a stretch financially.

But Stada managed to stoke more competitive bidding between the two sides over the weekend, resulting in further increases, two people familiar with the matter told Reuters.

“I don’t think that anyone just recently would have expected us to get this far in such a thorough manner and so quickly,” said Stada Chief Executive Matthias Wiedenfels.

Stada shares climbed 10.5 percent to 64.35 euros at 1130 GMT.

“We believe this is very generous to Stada’s shareholders and recommend they accept the offer,” said Jefferies analyst James Vane-Tempest. “We had previously viewed a best case offer at 65 euros.”


Cinven and Bain will look into buying more healthcare businesses to combine with Stada over the medium term, seeking costs cuts that will make the high investment in Stada worthwhile, two sources close to the consortium said.

Many buyout firms have been flush with cash after recent rounds of divestments and amid cheap borrowing costs. Eying stable healthcare businesses, financial investors also including CVC had been working on offers for Stada for months.

Stada said it has signed an investor agreement which would include protection provisions for employees. The company employed more than 10,000 people as of the end of 2015.

Bain and Cinven have agreed to avoid forced redundancies for four years in a move that exceeds staffing pledges incorporated in current business plans, Stada said.

The planned takeover vindicates the strategy of activist investor Active Ownership Capital (AOC), which built a stake of about 7 percent in shares and options before May last year, when the shares were trading at about only 30 euros.

Founded in 1895 in Dresden as a pharmacists’ cooperative, Stada’s generic drug business has come under price pressure as medical insurers in Germany, its largest market, are seeking bulk procurement deals at low prices.

Stada, which also derives considerable parts of its revenues from Russia and eastern Europe, is seeking to expand its non-prescription consumer care business and has also made forays into diagnostics kits and electronic cigarettes.

The offer documents will be published following approval by Germany’s financial regulator BaFin and the offer period would likely end some time in summer, the company said.

Bain and Cinven said they were advised on the deal by JP Morgan, Macquarie Capital and Rothschild.

Stada said that the buyers would fund about half of the deal with 2.6 billion euros in equity, the remainder with debt.

Including undrawn facilities, the buyout will be backed with just over 3 billion euros of debt financing, with drawn debt amounting to 2.7 billion euros, banking sources said.

Barclays, Citigroup, Commerzbank, Jefferies, JP Morgan, Nomura, Societe Generale and UBS are leading the debt financing, which will include leveraged loans and high yield bonds denominated in euros, the sources added.

They said that, given its size, the banks are likely to want to launch syndication of the deal to include more debt investors as quickly as possible. ($1 = 0.9450 euros)