Rhoen-Klinikum (DE0007042301) – or why merger arbitrage is a really hard business
The Story of the takleover fight for German hospital operator Rhoen Klinikum has been in the news quite often lately.
I try to summarize it in a few short sentences:
– Fresenius AG the big German healthcare group launched a bid at 22.50 EUR contingent on getting 90%
– in the meantime, some of the German competitors bought large stakes (Asklepios, Braun) of 5% to block the deal
– additionally some M&A arbitrage specialists (John Paulson) took stakes as well, hoping for a higher bid
– on the weekend, Fresenius then declared that they will not pursue the offer and the stock price drops almost 30%
Rhoen is now back or even below the level before the offer:
This shows that merger arbitrage is not an easy business. I have to confess that i was tempted to speculate on the Fresenies offer as well, but thanks to not having time to write a blog post, I didn’t jump into it as I would have done before I started the blog.
Fresenius is a big player and I would have thought that they might make at least one more attempt to gain 90%, which under German law would give them the right to squeeze out monrity shareholders.
However, now it is a different situation.
Rhoen is a well managed company and scores quite well in my Boss model. On top, we know that the private market value of the company is 22,50 EUR and one could theoretically buy it at a nice discount. Rhoen is one of the few German companies which do not have a majority shareholder although the fuender with his 13% holding still has a big influence but obviously not enough.
However, Rhoen is now clearly “in play”. I am considering really hard, if I should not open a half position for my “special situation” bucket.
Any opinions on that one ?