Exclusive: Evonik invited to bid again for LTS Lohmann - sources

FRANKFURT/DUESSELDORF Fri Dec 20, 2013 6:41am EST

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FRANKFURT/DUESSELDORF (Reuters) - The owners of German medical skin patch maker LTS Lohmann have invited Evonik (EVKn.DE) to make a new bid for the company after finding final offers from other bidders unsatisfactory, three sources familiar with the deal said.

The German specialty chemicals and plastics maker, which went public this year and is trying to diversify into the higher-margin healthcare sector, will now work on a new offer, which could be approved by its supervisory board in the coming weeks, the sources said.

Evonik had shown initial interest in LTS Lohmann, but dropped out of the race a few months ago. The sellers had proceeded with other bidders and last month narrowed the field to private equity groups Wendel (MWDP.PA) of France and Sweden's Nordic Capital, which were willing to value LTS Lohmann at 1.2 billion euros ($1.64 billion).

But LTS Lohmann's owners - Swiss drugmaker Novartis (NOVN.VX), German billionaire Dietmar Hopp and German investment company BWK - could not agree whether this was satisfactory.

They asked sellside adviser Morgan Stanley (MS.N) to approach Evonik over handing in a fresh bid, the sources said.

At least one of the owners is holding out for a valuation of 1.4 billion euros, or 15 times LTS Lohmann's expected earnings before interest, tax, depreciation and amortization (EBITDA), the sources said.

That would be a premium to the valuation of listed peers, which trade at an average multiple of around nine times EBITDA, according to Thomson Reuters data.

Evonik, which makes products considered less high-tech - such as feed additives, acrylic glass and super-absorbents for diapers - trades at an earnings multiple of 6.7. In August Germany's second-largest chemicals maker behind BASF (BASFn.DE) cut its outlook and stepped up cost-cutting measures, citing weaker markets.

"It is hard to understand why Evonik would buy a company at a valuation that is twice its own," one of the sources said, adding that the chemicals group is unlikely to reap significant synergies from such a transaction.

By contrast, Nordic Capital, looking to combine LTS Lohmann with another skin patch maker it bought, Acino ACIN.S, would have the scope to make dramatic cost cuts after such a move, the source said.

Evonik, Novartis, BWK and Morgan Stanley declined to comment. Hopp's investment company was not immediately available for comment.

LTS Lohmann makes about 286 million euros in annual sales from nicotine and other medical patches to treat conditions including Parkinson's Disease and Restless Legs Syndrome.

A key question for the future owner will be whether LTS Lohmann can succeed in preventing generic drugmakers from launching cheap copies of its Exelon patch for mild to moderate dementia. Novartis has sued Actavis (ACT.N) for trying to bring its version to market. ($1 = 0.7316 euros)

(Editing by Harro ten Wolde and David Goodman)

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