Akorn, desperate to cling to its now-abandoned buyout by Fresenius, has taken its case for the deal to Delaware Supreme Court. Its argument? The lower court judge who said Fresenius bagged the deal legally didn't follow a legal standard in making that decision.
In Akorn’s appeal, lawyers contend Fresenius knew about the risks of the $4.3 billion deal at the time of signing last year, and that Delaware Vice Chancellor J. Travis Laster made his decision based on “personal guesswork and intuition.”
The drugmaker hopes to force Fresenius to follow through with the deal, while Fresenius maintains it had every right to end the merger.
Fresenius' case for nixing the deal: Data integrity issues cropped up at Akorn since their agreement, and Akorn's stock price fell nearly 80% from 2017 highs as the problems went public. Fresenius had agreed to pay $34 per share for Akorn, and its stock now stands at about $5.50 per share.
“Every investigator who looked at this company, every time you picked up a rock, you saw more problems,” Fresenius’ lawyer said, going on to cite the precipitous drop in its stock price. Akorn didn’t try to demonstrate at trial that the business would turn around, Fresenius lawyers said.
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When Fresenius struck the buyout, it touted the acquisition as a “strategically complementary combination” that would diversify its portfolio and expand its sterile manufacturing capacity. The buy would add three U.S. manufacturing sites to Fresenius' network, plus another in India, and about 2,000 employees.
Soon after, however, the companies said they were looking into whether Akorn had violated FDA development standards, and Fresenius said in April it would walk away from the buy. Akorn said the investigation had “not found any facts that would result in a material adverse effect on Akorn’s businesses and therefore there is no basis to terminate the transaction.”
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Akorn sued, and the case went to trial in July. In October, the trial court judge ruled Fresenius had fulfilled its contractual obligations and acted legally when it terminated the merger.
After the trial, Laster wrote that “extensive and recurring quality and data integrity problems at Akorn convinced me that Akorn did not have a well-functioning quality system and lacked a meaningful culture of compliance.”