FRANKFURT, Jan 30 (Reuters) – Hedge fund Elliott has made a
return of about 13 percent on the bonds and shares it bought in
Celesio, the German drug distributor being taken over
by U.S rival McKesson, according to estimates by an
analyst at Market Securities.
After a fierce standoff, Elliott last week called an end to
its fight with McKesson over Celesio.
Though McKesson hiked its offer price for Celesio shares by
just 2.1 percent and Elliott bought most of its stake at or
above the original offer price of 23 euros a share, the hedge
fund made the bulk of its profit from selling the convertible
bonds, a person familiar with the transaction said.
According to a regulatory filing, Elliott received 71,428
euros ($97,500) per 2014 convertible bond, and
162,473 euros per 2018 convertible bond.
“We estimate the see-through price is about 30 euros, so
they made about 165 million euros altogether on their
convertible holding,” said Timothee de Mierry from brokerage
Market Securities said on Thursday, referring to the equivalent
price per share.
Elliott, led by U.S. investor Paul Singer, invested more
than 1.3 billion euros ($1.8 billion) in Celesio shares and
convertible bonds over the course of the drawn-out takeover
process. Based on the analyst’s assumption, the hedge fund made
a total of roughly 13 percent on its investment.
That would be in line with the average annual return of 14
percent that Elliott has booked on its investments in the past.
Elliott declined to comment.
According to the filing, Elliott has vowed not to disrupt
the deal any further and to refrain from buying any Celesio and
McKesson securities or to oppose their boards for a period of
five years.
While other minority shareholders in Celesio may seek a
higher price for any remaining shares and bonds at a later
stage, the agreement means Elliott will not do so.
Elliott has sued for higher compensation as a minority
shareholder in takeovers in the past – a strategy dubbed
“playing the back end.” It is expected to do the same following
Vodafone’s completed acquisition of German cable firm
Kabel Deutschland, in which Elliott had built a 10.9 percent
stake.
($1 = 0.7329 euros)
(Reporting by Arno Schuetze; Editing by Mark Potter)
