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PE–pharma M&A


A landmark healthcare deal for private equity

In 2017, we advised STADA on the tender offer to its shareholders by private equity investors Bain Capital and Cinven – the first competitive sale process in Germany controlled and led by the listed target.

Shareholder activism has become a more potent driver of M&A activity in recent years. In May 2016, we began advising STADA, a German manufacturer of generic and over-the-counter drugs, on corporate governance claims made by their activist shareholders.

The following year, we helped STADA complete one of the biggest activist-related deals of 2017, which saw Nidda Healthcare, Bain and Cinven’s investment vehicle, take a controlling stake in the company.

The offers

After receiving multiple non-binding letters from various private equity sponsors, STADA’s executive and supervisory boards set up a transparent, multistage process for all potential bidders – a model more typically associated with private M&A deals and a first in the context of a large, financially sound listed company.

At the end of the process, the two STADA boards received legally binding offers, including from two private equity consortia.

The hurdles

From there our advice helped the company navigate four key issues.

  1. Several leaks plagued the process. So we agreed with STADA that it was in its best interests to publish an ad hoc notification on the bids, making the process completely transparent at an early stage.

  2. The deal had a range of conflicting stakeholder interests, which required us to develop a balanced approach. Our team structured the investment agreement to include far-reaching commitments to STADA from the bidder, including, for example, the protection of employees.

  3. When the first Cinven-Bain bid failed to win the necessary shareholder approvals, both the executive and supervisory boards had to agree whether to accept a second offer. Once they did, we helped STADA develop a multistakeholder communication strategy that ensured this second bid was a success.

  4. To further complicate matters, the company also had to deal with the resignation of two of three executive board members. We helped STADA navigated the challenges presented by this change.

The resolution

Despite these hurdles, in July 2017 STADA confirmed that it had accepted the revised offer from the Cinven-Bain consortium. A month later, the necessary minimum acceptance threshold of 63 per cent was reached.

With a value of more than €5.3bn, the deal was the biggest private equity buy-out in four years and is one of the largest public European PE deals in history.

For Freshfields, the transaction saw us bring to bear our leading experience in public M&A and our strong track record in private equity. This meant we could structure the deal in a way that aligned with the private equity investment decision-making process, thus increasing the appeal for potential investors, maximising value and getting commitments that were in the interests of all stakeholders.

The postscript

Our work for STADA didn’t stop there though.

Since the deal closed, we have advised on the domination and profit-transfer agreement effective since March 2018, and on the refinancing and change of the terms of the bonds issued by STADA.

Most recently, in October 2018 we advised on Nidda Healthcare’s public delisting purchase offer. A delisting from the stock exchange should cut the associated costs for STADA and reduce the regulatory burden.