U.S.-based McKesson ($MCK) just wanted to finalize its $8 billion-plus deal for German drug wholesaler Celesio so that it could try to catch up to competitor AmerisourceBergen in Europe. But Paul Singer, practiced in the art of taking advantage of takeovers, wouldn't let that happen without getting something extra for his hedge fund, Elliott Management. And Thursday, he did.
McKesson Thursday upped its offer for Celesio to € 23.50 ($31.96) per share from the € 23 it initially offered, and Elliott agreed to sell its stake in Celesio to McKesson, Reuters reported. Elliott had taken a big enough stake to short-circuit the buyout, and McKesson Wednesday was trying to negotiate a special deal with the fund so it would support McKesson's takeover of Celesio, Reuters reported, citing sources. They told Reuters that Celesio's largest shareholder, "debt ridden" Franz Haniel & Cie, might even give up something in favor of Elliott so the deal could close by its Thursday night deadline.
McKesson is the largest U.S. drug wholesaler but has little presence in Europe. Celesio has operations in 16 European countries, as well as a foothold in Brazil, a rapidly growing emerging market. Meanwhile, competitor AmerisourceBergen made a move on the continent last year in a three-way tie-up with Walgreen ($WAG) and European wholesaler and retailer Alliance Boots.
The deals are all about getting a better strategic position for negotiating prices with drugmakers as the industry continues to globalize. If McKesson pulls it off, it is still getting what is considered a weak sister in the industry. Celesio has been struggling to make money as the U.K. and European governments steadily squeeze drugmakers on prices to reduce their healthcare spending. On the other hand, Alliance Boots, which has drugstores and a wholesale business, has been called the industry's "gold standard" by analysts.