Fresenius to acquire APP Pharmaceuticals in $3.7-billion deal

07 July 2008

Provider of hospital-based injectable pharmaceutical products APP Pharmaceuticals, Inc today said that it had entered in to a deal to be acquired by Fresenius SE, a German healthcare group with approximately $18 billion of sales. The deal had been approved by APP's board of directors requires usual regulatory approvals.

One of the biggest deals by the healthcare group, would allow the German firm an entry in the US market.It plans to fund thr deal Fresenius plans to finance the acquisition with a mix of debt and equity to minimise the impact on its books, with the larger portion through debt.

It said Fresenius will acquire the outstanding common stock of APP for $23.00 in cash per share plus a contingent value right (CVR) that could deliver up to an additional $970 million, or $6.00 per share in cash, if the financial results of APP meet certain targets (payable in Q2 2011). The cash consideration of $23.00 per share and potential for total value of $29.00 per share represents a premium of 29 per cent and 63 per cent, respectively, over the Company's closing stock price on 3 July 2008.

Based on the cash purchase price of $23.00 per share, the transaction values the fully diluted equity capital of APP at approximately $3.7 billion; and with the CVR, if fully realized, at a value of $4.6 billion. Fresenius will also assume all of APP's outstanding debt which currently totals approximately $940 million, net of cash. In aggregate the consideration for the acquisition of APP, including the CVR, could be up to $5.6 billion.

The takeover will have no overall impact on earnings per share in the first year but will clearly boost earnings from the second year onwards, Fresenius said. It expects to close the deal at the end of 2008 or start of 2009.

Fresenius is the world's biggest dialysis company and relies on the US for the bulk of its sales. It has been expanding into related drugs areas recently, buying several European intravenous drug companies including Portugal's Laboratório de Especialidades Farmacêuticas Almiro SA three years ago.