Fresenius dumps $4.3B Akorn merger
- German drugmaker Fresenius Kabi AG announced Monday it will terminate its $4.3 billion merger agreement with Akorn Inc., citing an internal investigation into practices at the generics maker, including what it contends were "material breaches of Food and Drug Administration data integrity requirements."
- Akorn, meanwhile, has denied the accusations and said it will enforce its rights under the merger pact.
- Fresenius said it offered to delay the decision to give Akorn time for its own investigation but claims Akorn declined.
Speculation grew in late February that Fresenius was looking for a way to pull out of the merger agreement it had inked with Akorn in April 2017.
The talk was based on reports Fresenius was investigating certain practices by the takeout target, yet the German drugmaker remained tight-lipped about what the scrutiny actually entailed. Investors and industry watchers were left wondering further after company executives disclosed on an earnings call that the origin of the investigation was an anonymous tip about breaches at Akorn.
At the time, analysts mused Fresenius might be searching for an excuse to drop out due to weakening performance at Akorn and unfavorable deal terms.
Under the original deal, Fresenius was to pay $34 per share plus $450 million in debt — totaling $4.3 billion all told. Yet, the market for generics has continued to weaken over the year since the deal's announcement, pressured by falling prices and increased competition.
Akorn is not letting the deal go easily. "We categorically disagree with Fresenius' accusations. The previously disclosed ongoing investigation, which is not a condition to closing, has not found any facts that would result in a material adverse effect on Akorn's business and therefore there is no basis to terminate the transaction," said the company in a statement.
"We intend to vigorously enforce our rights, and Fresenius' obligations, under our binding merger agreement."
Fresenius has been adding to its generic offerings over the last year. In August 2016, Fresenius Kabi invested $250 million to expand its generics manufacturing plant in Melrose Park, Illinois. It also acquired Merck KGaA's biosimilar business and two manufacturing plants in April 2017.
Shares of Akorn dropped by nearly 35% in early morning trading on Monday, before climbing back to trade at just under $13 per share.
Follow Lisa LaMotta on Twitter