By Eyk Henning
FRANKFURT--German health-care company Fresenius SE & Co.
KGaA (FRE.XE, FSNUY) is set to announce it won't place a second bid
for private hospital operator Rhoen-Klinikum AG (RHK.XE, RKAGY),
leading to hefty losses from hedge funds which bet on the deal
going through, two people familiar with the matter told Dow Jones
Newswires.
"The announcement could come early tomorrow [Monday]," one of
the people said.
DAX-listed health-care company Fresenius wanted to take over
Rhoen-Klinikum and combine it with its hospital unit, Helios, which
would have created Germany's largest operator of private hospitals
with six billion euros ($7.52 billion) in revenue.
After Fresenius failed to secure 90% of Rhoen-Klinikum's shares
with its first offer in late June, it intended to make a second bid
at an unchanged offer price of EUR22.50 per share, valuing
Rhoen-Klinikum at EUR3.1 billion, but with a lower minimum
acceptance threshold of just over 50%. Signs of a deal not taking
place emerged when sources told Dow Jones Newswires last week that
Fresenius's supervisory board has raised concerns regarding a
second offer due to the transaction's complexity.
Three of Rhoen-Klinikum's minority shareholders--Hamburg-based
hospital firm Asklepios Kliniken GmbH, pharmaceutical company B.
Braun Melsungen AG and hospital operator Sana Kliniken AG--lately
increased their stake in the company to around a combined 15% and
signalled they want to torpedo the takeover with lawsuits, a threat
that posed legal risks for Fresenius.
On Friday, German antitrust authority announced that closely
held Asklepios asked for permission to increase its stake in
Rhoen-Klinikum to more than 10%, further complicating the chances
of Fresenius's going forward with a second offer.
Asklepios and Sana both fear tougher competition from a
combination of Fresenius's Helios and Rhoen-Klinikum.
Fresenius intended to combine some of Rhoen-Klinikum's assets
with Helios in joint ventures in order to realize synergies. Under
Rhoen-Klinikum's bylaws, strategic decisions require the backing of
90% of shareholders. To get around this bylaw and gain control,
Fresenius sought to have the target's capital-side
supervisory-board members step down so that it could install its
own representatives. Rhoen-Klinikum's board members were all
willing to meet this condition, Dow Jones reported earlier.
Hoping for a new offer at EUR22.50, many hedge-fund operators
like Paulson & Co. invested in Rhoen-Klinikum after Fresenius
Chief Executive Ulf Schneider told analysts that a decision on
making another offer for Rhoen-Klinikum would be made in August. As
uncertainty around a second bid increased last week, trading in
Rhoen-Klinikum's shares was highly volatile, with the stock
finishing at EUR18.95 on Friday. Hedge-fund managers told Dow Jones
Newswires over the weekend they expect Rhoen-Klinikum's share price
to drop to around EUR15 or EUR16 if Fresenius walked away, causing
many of these investors massive losses.
--Heide Oberhauser-Aslan contributed to this article
Write to Eyk Henning at eyk.henning@dowjones.com
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