Deal in Focus: Bain and Cinven to take Stada private

Oscar Geen
13 April 2017

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After a quarter that saw the service provider subsector dominate the mid-high end of the buyout market, came the largest private-equity-backed takeover bid ever launched in Germany and the target was a pharmaceutical company. Oscar Geen reports

Bain and Cinven have signed an agreement to acquire Bad Vilbel-based pharmaceutical company Stada Arzneimittel for €66 per share, valuing the equity at €4.1bn and giving the business a total enterprise value of €5.3bn. This marks the end of a bidding process that involved another private equity consortium consisting of Advent and Permira, who had a bid at €58 per share rejected.

The offer of €66 per share, consists of a cash consideration of €65.28 per share plus a dividend of c720 per share. This represents a premium of 48.9% in relation to Stada's unaffected share price. Cinven will use capital from the Sixth Cinven Fund, which held a final close on its €7bn hard-cap in June 2016.

It was reported that Stada delayed the process in mid-March and requested that bidders improve their offers before it was resumed. Stada's CEO Matthias Wiedenfels however denies this: "The process never really stopped," he explained. "We are very proud of the investment banks involved who initiated and maintained a very structured and competitive process throughout." The investment bankers involved in the process were Stefan Jentzsch and Nick Johnston of Perella Weinberg and Carsten Laux, Stefan Teufer and Darren Campili of Deutsche Bank. The process was steered by the executive and supervisory boards.

The process never really stopped. We are very proud of the investment banks involved who initiated and maintained a very structured and competitive process throughout," – Matthias Wiedenfels, Stada

However, Stada did release a statement at the time confirming media reports that "expert sessions, which were planned as part of the structured bidding process, [had] been postponed based on the decision of the supervisory board". It added that the indicative bids did not yet reflect the fundamental value of Stada and offered bidders the opportunity to improve their bids. The same statement denied that the delay in the process was designed to allow another consortium, comprised of a private equity company and a strategic investor, to enter the process.

The transaction has not yet been completed, though Bain, Cinven and Stada have signed an investment agreement with the full support of the company's management and board. This agreement includes extensive protection provisions for employees, production sites and corporate strategy. Stada's management team expects changes to the board once the transaction is finalised but do not foresee any dramatic changes in strategy.

The takeover has a completion threshold of at least 75% of Stada shares and must meet certain conditions such as antitrust clearances and approval from the German Federal Financial Supervisory Authority.

According to information obtained by unquote" sister publication Debtwire, the transaction involves a €2.6bn debt package arranged by Barclays, Citi, Commerzbank, Jeffries, JPMorgan, Nomura, Société Générale and UBS.

Established in 1890 and headquartered in Bad Vilbel, near Frankfurt am Main, Stada produces off-patent active pharmaceutical ingredients for generic medicines, representing 59% of the company's sales, and branded products, which account for 41% of revenue. With 10,000 employees, the company generated €398m in adjusted EBITDA and €361.5m in reported EBITDA in 2016. Adjusted sales amounted to €2.167bn with reported sales hitting €2.139bn in the same period.

People
Bain Capital Private Equity – Dwight Poler, Michael Siefke (managing directors).
Cinven Partners – Supraj Rajagopalan, Bruno Schick (partners).
Stada Arzneimittel – Matthias Wiedenfels (chair, CEO).

Advisers
Equity – JP Morgan (M&A); Macquarie Capital (M&A); Rothschild (M&A); Kirkland & Ellis International (legal); Barclays (financial due diligence); Citi (financial due diligence); UBS (financial due diligence).