German healthcare group Fresenius Kabi has abandoned plans to acquire USA generic and over-the-counter drugmaker Akorn in a $4.3bn deal, citing FDA compliance issues.
Earlier, Fresenius had announced that it was no longer willing to acquire Lake Forest-based Akorn for an agreed price of 4.4 billion euros (5.4 billion US dollars) on account of accusations that the take-over target had breached of regulations set by the local Food and Drug Administration (FDA). In a statement Sunday, Fresenius said it had offered to delay its decision until Akorn had completed its own investigation, but was turned down. That sets up a potential legal battle with the US company over the aborted takeover.
Financial markets reacted positively to the news that Fresenius has given up on the merger, with the value of the DAX-listed medical technology company's shares rising in Monday trading. Yet, the market for generics has continued to weaken over the year since the deal's announcement, pressured by falling prices and increased competition.
As is generally the case when deals go sour, attention is now focused on the exit terms of the agreement, and specifically whether Fresenius can walk away without penalty or whether Akorn can claim a termination fee, which in the original merger agreement was valued at $129m. The investigation is not a condition to closing and the only remaining condition is approval from the Federal Trade Commission.
Fresenius disclosed its investigation, prompted by an anonymous tip, in February.
"We intend to vigorously enforce our rights, and Fresenius' obligations, under our binding merger agreement".
Fresenius will keep pursuing a stronger position in the US generics market via organic growth, as well as through acquisitions, spokesman Matthias Link said on Sunday.
Akorn would have given Fresenius's Kabi drugs unit access to a network of retail pharmacies and outpatient clinics, a broader range of potential customers for its generic drugs for cancer. That's when the German company said violations of FDA rules could imperil the takeover.
Speculation grew in late February that Fresenius was looking for a way to pull out of the merger agreement it had inked with Akorn in April 2017.
Akorn has said in its response that it "categorically disagrees" with Fresenius' accusations and intends to fight this in court.
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