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Akorn may sell for $34, but ‘double-digit downside if doesn’t happen’

April 13, 2017

Last week, Fresenius Kabi, a subsidiary of Fresenius Medical Care AG & Co. (ADR) FMS 1.15% said it was looking into the possibility of acquiring Akorn, Inc. AKRX 0.7%.

Since the announcement, shares of the latter have spiked more than 30 percent, currently trading close to $32.75.

In a report issued Monday, Leerink analysts Jason M. Gerberry and Etzer Darout weighed in on the issue, arguing that Akorn complements Fresenius and that a competitive bidding for the former seems unlikely. The experts set an estimated takeout valuation of $32–$34 per share, based on comparable deal multiples.

This target implies very little to zero upside potential from current stock prices; on the other hand, if the deal does not materialize, the downside potential comes in double digits – as Leerink values the company at roughly $22 or $23 per share.

Akorn’s Contribution

According to the research report, Gerberry and Darout believe Akorn would provide Fresenius with “an expanded injectable business and a top US generic ophthalmic business while adding a few other specialty dosage forms.”

From the acquirer’s perspective, the purchase would add a few cost synergies, estimated at around $100 million.

Having said this, they noted that both companies pay very elevated tax rates of approximately 31 percent, so, “it’s unclear if financial synergies are a driving force behind the potential acquisition.”


Latest Ratings for AKRX

Date Firm Action From To
Mar 2017 Deutsche Bank Downgrades Buy Hold
Dec 2016 Goldman Sachs Initiates Coverage On Sell
Nov 2016 Bank of America Downgrades Buy Underperform


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