Following a court ruling, Fresenius, a specialty and generic pharmaceuticals company, has legally terminated its $4.75-billion merger with Akorn, a Lake Forest, Illinois-headquartered specialty generic pharmaceutical company. In April 2018, Fresenius decided to terminate the company’s merger agreement with Akorn due to Fresenius’ assertion of Akorn’s failure to fulfill several closing conditions.

In an October 1, 2018 decision, Delaware Civil Court Vice Chancellor J. Travis Laster declared that Fresenius fulfilled its contractual obligations with Akorn and could legally exit the merger. “Fresenius validly terminated the Merger Agreement because Akorn’s Regulatory Compliance Representations were untrue, the deviation from the representations could not be cured by the Outside Date [April 24, 2018], and the degree of deviation would reasonably be expected to result in a Regulatory MAE [Material Adverse Effect],” the court ruling said.

Fresenius said its decision is based on, among other factors, material breaches of US Food and Drug Administration data-integrity requirements relating to Akorn’s operations found during Fresenius’ independent investigation. “Any second thoughts that Fresenius had about the Merger Agreement were justified by unexpected events at Akorn,” the ruling stated.

Fresenius originally agreed to acquire Akorn for $4.3 billion plus approximately $450 million of net debt, for a total of $4.75 billion in April 2017 with an expected closing in early 2018 at the time of the merger announcement.

In a statement, Akorn says it plans to appeal. “We are disappointed by the ruling by the Delaware Chancery Court determining not to force Fresenius to close, and we continue to believe Fresenius’ attempt to terminate the transaction is in breach of our binding merger agreement, said Akorn in an October 1, 2018 statement. “We intend to appeal, in an effort to vigorously enforce our rights and continue to protect the interests of our Company and our shareholders.”

Source: Court of Chancery of the State of Delaware, Fresenius, Akorn