Elliott Set To Seek Higher Price For German Drug Distributor

Nov 27 2013 | 9:33am ET

Elliott Management has put itself in position to demand a higher price for German pharmaceutical distributor Celesio from rival McKesson.

The hedge fund has bought up 25.16% of Celesio's voting shares. Even when those shares are diluted by convertible bonds, Elliott's stake will be 21.05%, which should be enough to ensure that McKesson is unable to meet the 75% approval hurdle it needs for its US$8.3 billion takeover.

McKesson is offering €23 per share for the 49.99% of Celesio not owned by Franz Haniel & Cie; the stock closed at €23.47 yesterday. Elliott has until Thursday to disclose its intentions to Celesio, which then has until Tuesday to publish the hedge fund's statement. Elliott is expected to push McKesson to at least €2 or €3 more per share than its current offer.

Should McKesson refuse, it could let its offer lapse and simply buy Haniel's majority stake, which would trigger a mandatory offer at the stock's average price over the past three months, which would be below €23.

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