* Magnetar says minority Celesio shareholders short changed
* Says also to sue over terms of domination agreement
(Adds details on lawsuit, background on deal)
FRANKFURT May 21 Hedge fund Magnetar Capital is
suing U.S. drugs wholesaler McKesson, saying its
acquisition of German peer Celesio short-changed
minority shareholders and bondholders by around 370 million
euros ($507 million).
McKesson structured the transaction in an unlawful way,
discriminating against the minority investors, Magnetar said in
a statement on Wednesday.
McKesson's bid for Celesio succeeded following drawn-out
negotiations with another Celesio shareholder, activist hedge
fund Elliott International, led by U.S. investor Paul
Elliott, which had invested more than 1.3 billion euros
($1.8 billion) in Celesio shares and bonds that convert into
shares, ended up selling all those securities to McKesson.
Magnetar, which holds more than 3 percent in Celesio's
shares, accuses McKesson of paying convertible bond holders such
as Elliott an equivalent of up to 30.95 euros per underlying
share, while owners of Celesio stock were only offered 23.50
euros a share.
Sources familiar with the transaction have said in the past
that Elliott, which bought Celesio shares at an average price of
23 euros apiece, made the bulk of its profit from its
convertible bond holdings rather than from selling its
"Under the German minimum price protections, McKesson should
have offered to pay over 370 million euros ($507 million) of
additional consideration to minority shareholders and
bondholders of Celesio," Magnetar said.
McKesson bought Celesio as part of its drive to become a
global leader in drugs distribution and boost its bargaining
power with pharmaceutical firms such as Novartis and
An initial bid foundered after failing to secure the 75
percent shareholder support it had set as a condition.
The second attempt succeeded and McKesson earlier this month
started consultations with Celesio's board on a so-called
domination and profit transfer agreement, which will allow the
U.S. group to take full control and tap the German company's
As part of this deal, McKesson plans to offer investors
which did not tender their shares 22.99 euros a share.
Minority investors that stay on board after a takeover bid
has succeeded typically reject such offers and seek a mark-up on
the offer in court. Some hedge funds specialise in this
strategy, dubbed "playing the back end".
Magnetar also said it would file a separate lawsuit in a bid
to get the terms of the planned domination agreement revised.
McKesson and Celesio declined to comment.
($1 = 0.7302 Euros)
(Reporting by Arno Schuetze and Ludwig Burger; Editing by Mark