Fresenius abandons $5.7b Akorn deal, setting up fight

Fresenius' headquarters in Bad Homburg near Frankfurt am Main in Germany.The company disclosed its investigation into Akron, prompted by an anonymous tip, in February.
Fresenius' headquarters in Bad Homburg near Frankfurt am Main in Germany. The company disclosed its investigation into Akron, prompted by an anonymous tip, in February.PHOTO: AGENCE FRANCE-PRESSE

BERLIN • Fresenius walked away from a pending US$4.3 billion (S$5.7 billion) acquisition of Akorn, 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. It 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 United States company over the aborted takeover.

Investors had become increasingly wary of the deal since Fresenius announced it a year ago. Competition was eroding Akorn's profit and revenue expectations and former chairman John Kapoor left the company after being arrested on separate racketeering charges.

Under the terms of the deal announced in April last year, Akorn had agreed to pay a US$129 million termination fee if the agreement fell through, Fresenius said.

Akorn said in a statement on Sunday that the issues being investigated were not a condition to closing and would not materially hurt the German company, therefore giving it no reason to drop the deal. "We categorically disagree with Fresenius's accusations," it said after Fresenius' statement. "We intend to vigorously enforce our rights, and Fresenius' 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.

German company Fresenius said its outside experts found "material breaches" of US Food and Drug Administration standards while reviewing Akorn's operations. It 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.

Akorn 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 US$19.70 last Friday, about 42 per cent below Fresenius's US$34-a-share price.

Fresenius shares had lost about 11 per cent since the Akorn deal was announced on April 24 of last year, compared with a 4.5 per cent increase in Germany's benchmark DAX Index. Akorn would have given Fresenius' 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, the world's biggest provider of kidney dialysis. Fresenius Medical Care agreed over the weekend to sell its controlling interest in Sound Inpatient Physicians, an acute-care services provider, for US$2.15 billion.

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A version of this article appeared in the print edition of The Straits Times on April 24, 2018, with the headline 'Fresenius abandons $5.7b Akorn deal, setting up fight'. Print Edition | Subscribe