Another Pharma Gobbled Up Overseas With Cheap Dollars (APPX, FMS)

July 7, 2008 · Filed Under General · Comments Off

APP Pharmaceuticals Inc. (NASDAQ: APPX) is seeing a surge in trading this morning. The pharmaceutical producer for cancer, infections, anesthesia, and critical-care applications, is suddenly a takeover stock.

German health-care giant Fresenius has agreed to acquire APP for $23.00 per share in a cash buyout. There is also an earn-out option that would enable holders to receive up to an additional $6.00 if APP’s financial results meet certain targets, although that appears to go out to 2011.

So this gives an implied merger price of about $3.7 billion up to $4.6 billion. So depending upon the earn-out and performance clause, investors will get either a 29% premium, or they will receive a buyout that could be as mush as 63% over the life of that term.

Fresenius has interests in products and services for hospitals, dialysis and home-based medical care. It is also parent to Fresenius Medical Care (NYSE: FMS). The company will assume APP’s $940 million of debt, net of the company’s cash on hand, as part of the terms.

If you wonder if this is just another European medical or pharmaceutical operation buying into the U.S. on the cheap because of the dollar weakness, this seems only part of this goal. The new larger Fresenius gets to enter the U.S. pharmaceutical market, and its larger sales force will gain more than 100 sellable products worldwide.

Fresenius shares in the U.S. are trading down by about 2%, but its parent in Germany saw shares down as much as 10% in late morning trading in the E.U.

While this is subject to antitrust and CFIUS review, APP’s controlling shareholders have reportedly agreed to vote in favor of the deal.

Jon Ogg
July 7, 2008

Tags: APP, APPX, drug acquisitions, Fresenius