* McKesson ups offer by 0.50 euros/share
* Hedge fund Elliott had said initial 23 euro offer was too
* Celesio shares trade above revised offer price
By Alexander Hübner and Ludwig Burger
FRANKFURT, Jan 9 U.S. drugs wholesaler McKesson
raised its offer for German peer Celesio to
about 6.2 billion euros ($8.4 billion) including debt,
mollifying an activist hedge fund that had been blocking the
McKesson increased its bid to 23.50 euros per Celesio share
from the 23 euros it offered in October, the San Francisco-based
company said on Thursday.
The U.S. firm is seeking to forge a global leader in drugs
distribution to boost its bargaining power with big
pharmaceutical companies such as Novartis and Teva
, in what could be the largest health-sector takeover
in Germany in eight years.
McKesson, the largest U.S. drugs distributor and its closest
rivals AmerisourceBergen and Cardinal Health,
who command a combined 95 percent U.S. market share, have all
been looking to team up with pharmacy chains or to grow
Celesio shares were trading at 24.00 euros at 1443 GMT on
Thursday, just above the increased offer price, reflecting
investors' speculation that the deal would go through and that
McKesson would likely offer a slight premium to buy out any
remaining minority shareholders after taking control.
The German company has a drugs wholesale business and owns a
network of pharmacies in Europe which trade under the Lloyds
Celesio's majority investor Franz Haniel & Cie
backed the original 6.1 billion euro bid. But hedge fund Elliott
Management Corp, the German company's second-largest
shareholder, said it was too low.
Spokesmen for McKesson and Elliott declined to give a total
figure for the revised offer.
Based on the 0.50 euro per share increase and assuming there
are about 204 million shares outstanding - including all those
from Celesio's two convertible bonds -
the new offer is worth at least 100 million euros more than the
McKesson's higher offer is contingent on the U.S. firm
getting at least 75 percent of Celesio's shares, including those
from bonds that convert to shares. Its agreement with Elliott
gets McKesson closer to reaching that goal by the deadline of
midnight on Thursday.
Elliott, run by U.S. investor Paul Singer, said it has
agreed to sell shares equivalent to at least 13 percent of
Celesio's equity capital, taking into account the dilutive
effect of the convertible bonds.
Overall, convertible bonds would account for 16.7 percent of
the company's share capital if they were all converted.
The hedge fund also offered to sell all 4,866 convertible
bonds it holds in Celesio, provided that the 75 percent
threshold is reached. An Elliott spokesman declined to say how
many shares those bonds convert to.
That means McKesson still needs smaller Celesio shareholders
to tender their stock for the deal to go through.
Elliott, which could still hold a stake in Celesio even if
the deal succeeds, could then as a minority shareholder press
MckKesson for an even higher price.
McKesson said it would pay Haniel 23.50 euros a share for
its 50.01 percent stake.
Elliott spent roughly 800 million euros ($1.1 billion) on
close to a quarter of Celesio's shares after McKesson made its
initial offer and then rejected it as too low.
Sources told Reuters on Wednesday that McKesson was looking
at concessions to get the deal done.
The new offer would value Celesio including its debt at
about 11 times expected earnings before interest, taxes,
depreciation and amortisation (EBITDA) for 2013, broadly in line
with the multiple its U.S. suitor is trading at.
That compares with a multiple of about 11 times EBITDA that
U.S. drugstore chain Walgreens paid for a stake in
Alliance Boots in 2012.