Delaware judge says Fresenius can walk away from $4.8 billion Akorn deal

WILMINGTON, Del (Reuters) - Germany's Fresenius SE FREG.DE won a rare court ruling allowing the healthcare group to walk away from its $4.75 billion takeover of Akorn Inc AKRX.O, sparking a more than 50 percent fall in the U.S. generic drugmaker's shares.

Travis Laster, a judge on the Delaware Court of Chancery, ruled that Fresenius had validly terminated its merger agreement following a dramatic decline in Akorn’s business.

In a surprise ruling as Delaware judges have generally held buyers to merger deals, Laster rejected Akorn’s argument that Fresenius Chief Executive Stephan Sturm suffered buyer’s remorse and directed his lawyers to construct a case to end the deal.

“This is a landmark case,” said Larry Hamermesh, a professor at Delaware Law School in Wilmington, Delaware.

Fresenius terminated the $34-a-share deal in April, a year after agreeing to acquire Akorn, which responded by suing it in the Court of Chancery in Delaware, alleging that Sturm wanted out of what he came to see as a huge embarrassment.

Akorn shares dropped 54 percent to $5.97, their lowest level in more than seven years, on the ruling while Fresenius jumped 8.3 percent to 68.48 euros by 1412 GMT.


“We intend to appeal, in an effort to vigorously enforce our rights and continue to protect the interests of our Company and our shareholders,” Lake Forest, Illinois-based Akorn said in a statement following the ruling.

Fresenius acknowledged the judge’s opinion and said that his judgment was not yet final.

Laster, who oversaw a five-day trial, wrote in a 246-page opinion that Fresenius “responded to a dramatic, unexpected, and company-specific downturn in Akorn’s business that began in the quarter after signing”.

He said Fresenius uncovered a “magnitude of inaccuracies” in Akorn’s regulatory compliance that amounted to a “material adverse event”, allowing the German company to end the deal.

Sturm has diversified Fresenius through a series of deals since he took the helm in 2016 and has had to defend against criticism that his team rushed due diligence on Akorn.

Bernstein analysts said they expected negative investor sentiment from the Akorn row to take some time to clear.

“Management’s judgment remains in question, having entered into a transaction with such a troubled company,” they said, adding there was a risk Fresenius could still lose on appeal.

Additional reporting by Maria Sheahan in Berlin; editing by Jonathan Oatis and Alexander Smith