Fresenius SE scraps Akorn takeover deal
Outside experts find ‘material breaches’
BERLIN: Fresenius SE yesteday walked away from a pending $4.3 billion acquisition of Akorn Inc, a US maker of generic cancer drugs, after a probe found problems with the target company’s product-development practices.
The German company said its outside experts found “material breaches” of US Food and Drug Administration standards while reviewing Akorn’s operations.
Fresenius said it had offered to delay its decision until Akorn had completed its own investigation, but was turned down, setting up a potential legal battle with the US company over the aborted takeover.
Fresenius shares rose as much as 2.9% early yesterday in Frankfurt.
Investors had become i ncreasingly wary of the deal since Fresenius announced it a year ago.
Competition was eroding Akorn’s profit and revenue expectations and its former chairman, John Kapoor, left the company after being arrested on separate racketeering charges.
Under the terms of the deal announced in April 2017, Akorn had agreed to pay a $129 million termination fee if the agreement fell through, Fresenius said.
Akorn said in a statement on Sunday that the issues being investigated weren’t a condition to closing and wouldn’t materially hurt the German company, therefore giving it no reason to drop the deal.
“We categorically disagree with Fresenius’s accusations,” Akorn said after Fresenius issued its own statement saying it was walking away. “We intend to vigorously enforce our rights, and Fresenius’s obligations, under our binding merger agreement.”
Fresenius disclosed its investigation, prompted by an anonymous tip, in February. Some analysts had viewed a price cut as more likely than a collapse of the deal.
“Bad Homburg-based Fresenius will keep pursuing a stronger position in the US generics market via organic growth, as well as through acquisitions,’’ spokesman Matthias Link said on Sunday.
Lake Forest, Illinois-based Akorn’s shares have traded well below Fresenius’s offer price since the end of February, when the German company said violations of FDA rules could imperil the takeover.
Akorn closed at $19.70 on Friday, about 42% below Fresenius’s $34-a-share price.
Through Friday, Fresenius shares had lost about 11% since the Akorn deal was announced on April 24 of last year, compared with a 4.5% increase in Germany’s benchmark DAX Index.
Akorn would have given Fresenius’s Kabi drugs unit access to a network of retail pharmacies and outpatient clinics, a broader range of potential customers for its generic drugs for cancer.
Fresenius also manages hospitals in Germany and Spain and controls Fresenius Medical Care AG, the world’s biggest provider of kidney dialysis.
Fresenius Medical Care agreed over the weekend to sell its controlling interest in Sound Inpatient Physicians Holdings LLC, an acute-care services provider, for $2.15 billion.
Fresenius Medical also lowered its outlook for 2018 revenue, saying it expected a gain of 5-7% at constant currency rates, down from a previous expectation of a roughly 8% increase.
The company cited a reassessment of dosing of calcimimetic drugs in its dialysis service business in the US. The shares fell as much as 4.5% early yesterday.