£377m bid lifts AAH shares

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The Independent Online
A £377m takeover bid was yesterday launched against the troubled AAH pharmaceuticals wholesaling, and retailing company by Gehe of Germany. AAH, which runs with the corporate slogan "thinking ahead to stay ahead", said the bid, pitched at 420p cash per share, was opportunistic.

The move by Gehe, which wants to further strengthen its leading position in Europe, comes after AAH unsettled investors with two disappointing trading statements.

A successful takeover would also give Gehe, already the leading wholesale pharmaceuticals company on the Continent, a sizeable foothold in Britain. Despite its problems amid the ongoing price war, AAH is the UK leader with a 29 per cent share of the wholesale market for prescription and other over-the-counter medicines.

Criticism of management is at the forefront of Gehe's reasoning why AAH's shareholders, who until yesterday had seen the value of their investments drop considerably since before Christmas, should accept the bid.

Dieter Kammerer, chairman of Gehe's management board, said: "We are making a generous offer to shareholders who have suffered from the poor performance of the company. It appears that, in terms of profitability, AAH is failing to keep up with its competitors."

Gehe is 50.2 per cent-owned by the private Franz Haniel & Cie, but has share listings on several bourses in Germany. The company is valued at DM 3.31bn (£1.42bn) and turned over DM7.4bn and made pre-tax profits of DM113m for the six months to last June.

Against that, AAH's operating profits from continuing operations in the year to last March eased from £39.3m to £38.5m. However, the inclusion of acquisitions, most notably of retail pharmacies, enabled AAH to report a 7 per cent rise in pre-tax profits to £40m.

Initial reaction among analysts was that Gehe's move made industrial sense, but the offer price might not be quite enough to win the day. AAH shares climbed 122p to 431p yesterday, a 2.6 per cent premium to the bid price and a level they traded at late last year before being sent tumbling by a disappointing 14 per cent fall in interim profits to £16.4m.

The shares fell sharply, and touched a year's low of 282p earlier this month after AAH warned about trading in two non-core divisions, and also announced the theft of £3m of cheques, since recovered.

John Padovan, chairman of AAH, countered Gehe's attack on management's ability. "We are confident we can work it out right by ourselves," he said.

While most of AAH's trading problems have been in non-core businesses, the company has been feeling the squeeze of margins in the competitive wholesale market.