Ratiopharm owner Ludwig
Merckle has turned down offers for drugs distributor Phoenix, as
he struggles to retain control over his late father's diminished
business empire, sources close to the matter said Wednesday.
Creditor banks have urged Merckle to consider informal
approaches for Phoenix, even before the sale of another prize
asset in the Merckle empire that is on the block, its Ratiopharm
generic drugs business.
But Merckle has resisted the approaches to sell Phoenix,
Europe's second-largest drugs wholesale group, and instead
champions the idea of taking it public, the sources said.
Although Phoenix is far from ready for an initial public
offering, Merckle could at a later stage sell a stake on the
stock market to pay off debt and possibly also offer new shares
to fund the company's growth, two of the sources.
Buyout firm KKR, which owns Britain's Alliance
Boots pharmacy chain, has recently showed renewed interest in
Phoenix, extending informal offers that were viewed as
attractive by Merckle's lenders, two of the sources said.
KKR first expressed interest in Phoenix about a year ago.
Pharmaceutical wholesaler McKesson and pharmacy
benefit manager Medco, both U.S.-based, have also
expressed an interest in Phoenix, a separate source said.
All eyes are now on generic-drug maker Ratiopharm, which
Ludwig Merckle has put up for sale as part of concessions his
late father, Adolph Merckle, made to creditors.
Only a Ratiopharm deal value of about 3 billion euros,
including debt, would give Merckle the financial clout to keep
Phoenix completely under his control, the sources said.
The bid from Actavis, backed by its main lender Deutsche
Bank, is the only one said to have reached that
level, while offers from rivals Teva and Pfizer have fallen short so far.
But Actavis' campaign is seen as an uphill struggle because
the Icelandic generics maker is burdened by more than 5 billion
euros in debt, most of which was provided by Deutsche.
Germany's largest bank would either have to convert some of
its debt in Actavis into equity, or find a partner on short
notice to provide more equity funding, several of the sources
said.
A spokeswoman for the Merckle family declined to comment as
did spokespeople for Deutsche Bank and KKR.
A last round of binding bids is due around the end of March
and Teva and Pfizer are regarded as determined contenders,
eyeing a fast track into the world's second-largest generics
market.
"The Merckle family is in a good starting position for talks
over Phoenix after the Ratiopharm sale," one of the sources said.
Ratiopharm is vying with Stada for second place
among Germany's largest generic-drug makers, trailing the Hexal
generics business of Swiss drug major Novartis NOVN.V.
Adolf Merckle founded Ratiopharm in 1973, the first to
introduce generics in Germany. The family patriarch threw
himself in front of a train in January 2009 after ceding control
of his business empire to lenders during the financial crisis.
His oldest son Ludwig is overseeing the breakup of the
conglomerate.
A recovery in financial markets has helped Merckle raise more
than 2 billion euros by placing a majority stake in Germany's
HeidelbergCement on the stock market.
He also fetched more than 400 million euros from selling
Ratiopharm's Swiss sister company Mepha to U.S. drugmaker
Cephalon
He is now scrambling to retain control over Phoenix, a
minority stake in HeidelbergCement and smaller assets such as
Kaessbohrer, a maker of snow-grooming vehicles.
Phoenix has annual sales of more than 20 billion euros,
slightly less than German-listed rival Celesio, which
has a market value of 3.9 billion euros.
($1=1.077 Swiss Franc)