Fresenius originally celebrated its deal to buy Akorn and its generic offerings for $4.3 billion, but after a data integrity probe and an ensuing legal saga, the company has won the right to walk away from the deal.
In a decision Monday, Delaware Vice Chancellor J. Travis Laster wrote that Fresenius fulfilled its contractual obligations in a merger agreement with Akorn and can legally exit the merger.
"Any second thoughts that Fresenius had about the Merger Agreement were justified by unexpected events at Akorn,” Laster wrote, citing data integrity issues that came up at Akorn after the deal announcement.
Fresenius struck its deal to buy Akorn last April, touting the acquisition as a “strategically complementary combination” that would diversify its portfolio and expand its Fresenius Kabi sterile manufacturing capacity. With the deal, it was slated to add three U.S. manufacturing sites, plus another in India, and about 2,000 employees.
But in February, the companies disclosed that they were looking into whether Akorn violated FDA drug development standards. The saga escalated when Fresenius abandoned the buyout in April, and an analyst wrote at the time that a “legal battle royale” could ensue.
Akorn responded that an investigation “has 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.” Akorn asked the court to force Fresenius to close the deal by arguing Fresenius had buyer's remorse. The companies went to trial over the merger in July.
In his opinion, Laster wrote that a whistleblower brought up allegations of quality assurance fraud, and that Akorn didn't investigate the complaint.
“The 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,” the judge wrote.
With that ruling, the judge ruled that Frenius legally terminated the merger.