Elliott Moves To Block Pharma Merger

Dec 10 2013 | 1:24pm ET

Elliott Management today made good on its threat to try to sink the merger of two pharmaceutical distributors.

The activist hedge fund warned that it would not tender its shares in Celesio unless its would-be buyer, McKesson, "offers fair compensation to all Celesio shareholders and bondholders." McKesson's US$8.3 billion deal requires the tendering of 75% of Celesio shares; Elliott currently owns 25.16%.

Even after that stake is diluted by bond conversions, Elliott will still hold a 22.7% voting stake, which should be enough to block the deal.

McKesson can back out of a deal to buy a majority stake in Celesio from Franz Haniel & Cie if 75% of shares are not tendered. But Elliott does not seem concerned that the deal will die.

"We believe Celesio has other paths to maximize shareholder and bondholder value," Elliott said, suggesting that the company could be split: "Sell the wholesale business to a strategic bidder and the pharmacy business to a separate buyer."

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