Akorn, Inc. (NASDAQ: AKRX) is having an overwhelmingly rough start to the trading session this morning as news is breaking that a merger agreement signed about a year ago is falling apart. That’s right, the company is no longer likely to merge with Fresenius Medical Care AG & Co. (ADR) (NYSE: FMS). While this is painful news for investors as is, it’s not the worst part. The worst part in all of this is why the merger is not likely to take place. Today, we’ll talk about:
- The cancellation of the Fresenius merger;
- what we’re seeing from AKRX as a result; and
- what we’ll be watching for ahead.
AKRX Dives On Cancelled Merger Agreement
As mentioned above, Akorn is having an overwhelmingly rough start to the trading session this morning as news breaks that Fresenius is looking to back out of its acquisition of the company. Back in April of 2017, AKRX and FMS entered into an agreement. Under the terms of this agreement, Fresenius would buy Akorn for a total price of approximately $4.3 billion. However, Fresenius launched a probe into the company that seems to have found some issues.
During the probe FMS launched into AKRX, there were major concerns unearthed. According to the German company, its outside experts found material breaches of United States Food and Drug Administration (FDA) data-integrity standards while reviewing the company’s operations. When announcing the termination of the merger agreement, Fresenius said that it offered to delay its decision to cancel the merger until Akorn did a review of its own, but according to the company, this offer was turned down. Nonetheless, AKRX has made it clear that they intend to fight this decision and force Fresenius to live up to its obligations under the binding merger agreement. In fact, in response to the news, AKRX, had the following to offer:
We categorically disagree with Fresenius’ accusations. The previously disclosed ongoing investigation, which is not a condition to closing, has not found any facts that would result in a material adverse effect on Akorn’s business and therefore there is no basis to terminate the transaction. We intend to vigorously enforce our rights, and Fresenius’ obligations, under our binding merger agreement.
What We’re Seeing From The Stock
One of the first lessons that we learn when we start to dig into the market is that the news causes moves. In this particular case, the news proved to be overwhelmingly negative. After all, investors rejoiced in the potential acquisition by Fresenius. However, not only does that deal seem to be falling through, but there may also be major issues with regard to data that could lead to struggles and regulatory action ahead. So, it’s no surprise to see that Akorn is falling hard in the market this morning. As is almost always the case, our partners at Trade Ideas were the first to alert us to the losses. At the moment (7:35), AKRX is trading at $13.10 per share after a loss of $6.60 per share (33.50%) thus far today.
Stop wasting your time! Start finding winning trades in minutes with Trade Ideas!
What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on AKRX. In particular, we’re interested in following the story surrounding the potential material breaches of FDA data standards and whether or not this is truly the case. If so, we’ll be watching for a solution. We’re also watching the acquisition news. At the end of the day, Akorn said that it plans on enforcing its binding agreement, which could bet a bit hairy ahead. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
Never Miss The News Again
Do you want real-time, actionable news delivered to your inbox? Join the CNA Finance mailing list below!