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Analyst Blog

In a major setback, McKesson Corporation (MCK - Analyst Report) announced that it has failed to obtain the mandatory 75% stake for the successful completion of the previously announced acquisition of Germany-based Celesio.

McKesson launched a public takeover offer for the outstanding shares of Celesio in Dec 2013. Last week, McKesson upped its offer to €23.50 per share from €23.00 per share for a 50.01% stake in Celesio.

The increase in offer price was expected as it was reported that hedge fund Elliot Associates, which holds approximately 25% of shares in Celesio, indicated that the offer price of €23 per share grossly undervalues Celesio's worth. 

The offer price of €23.50 was the final offer from McKesson. The acquisition was conditional upon regulatory approvals along with McKesson obtaining a 75% stake in Celesio.

Investors were clearly disappointed as shares were down 4.73% on the news.

We remind investors that McKesson announced in Oct 2013 that it has signed an agreement with Franz Haniel & Cie. GmbH, the largest shareholder in Celesio, to acquire a majority stake in Celesio for approximately €23 per share or $8.3 billion. Elliot Associates were reportedly opposing the acquisition thereafter.

We are disappointed with the setback. Celesio provides logistics and services in the pharmaceutical and healthcare sector with operations in approximately 14 countries. The acquisition would have allowed McKesson to gain a solid foothold in Europe, thereby geographically expanding its core operations further.

McKesson currently carries a Zacks Rank #2 (Buy). Other stocks that currently look attractive include Cardinal Health (CAH - Analyst Report), Align Technology Inc. (ALGN - Analyst Report) and Herbalife Ltd. (HLF - Snapshot Report). While Cardinal Health and Align Technology carry a Zacks Rank #1 (Strong Buy), Herbalife holds a Zacks Rank #2 (Buy).

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