FRANKFURT--Fresenius SE & Co. KGaA (FRE.XE) said it won't
place a second bid for private hospital operator Rhoen-Klinikum AG
(RHK.XE) in what could have cemented the health-care company's
leading market position in Germany.
"Fresenius has decided not to submit a new takeover offer to the
shareholders of Rhoen-Klinikum for the time being," Fresenius said
Monday, adding it had tried to find solutions to combine its own
hospital operator Helios with Rhoen-Klinikum by taking over a stake
of less than 90%.
The move would have strengthened Fresenius's position as
Germany's largest operator of private hospitals with six billion
euros ($7.52 billion) in revenue.
"A combination of Rhoen-Klinikum and Helios was the first-ever
opportunity to build a country-wide integrated health care network.
We regret that our public offer was blocked," Fresenius Chief
Executive Ulf Schneider said, adding an acquisition under current
conditions wouldn't have added value with manageable risk.
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 a share, valuing
Rhoen-Klinikum at EUR3.1 billion, but with a lower minimum
acceptance threshold of just over 50%.
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 ten supervisory
board members representing the shareholders 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.
Signs of a deal not taking place emerged, however, when people
familiar with the matter told Dow Jones Newswires last week that
Fresenius's supervisory board has raised serious 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 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 and thus want
to keep Rhoen independent.
Fresenius said Monday it currently holds a stake of 5% minus one
share in Rhoen-Klinikum and "plans to slightly increase its
shareholding" to preserve Rhoen's strategic options in the
consolidating German hospital market. Fresenius's unit Helios ranks
first in Germany's market, Rhoen and closely held Asklepios rank
second and third.
Analyst Moritz Dullinger from Kepler Capital Markets in a
research note Monday said he believes Fresenius is willing to block
any takeover attempts from competitors like Asklepios or Sana,
which are both interested in increasing their stake in Rhoen, Dow
Jones Newswires reported earlier.
"Rhoen's complex shareholder structure and the condition to own
above 90% of shares for full control results in a deadlock
situation," the analyst added. He rates the shares reduce with a
target price of EUR16.
Rhoen's shares plummeted 19% to EUR15.31 Monday, leading to
hefty losses for many hedge-fund operators which invested in Rhoen
in the hope for a new offer at EUR22.50. 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. Hedgefund John Paulson said earlier this year he supports
Fresenius's takover attempt, adding he will tender his shares.
Write to Eyk Henning at eyk.henning@dowjones.com
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