Investor Group Bids to Take Gambro Private

In recent years, Swedish medical supply giant Gambro AB (Stockholm) has been something of a troubled company. In 2004, the company’s U.S. dialysis business ran afoul of federal healthcare fraud charges. And earlier this year, FDA cited the company for quality systems violations. But apparently none of those problems have been enough to dissuade determined investors.

On April 3, Gambro’s board of directors recommended that its shareholders accept a buyout offer from Nordic investor group Indap AB, a joint venture of Investor AB and EQT IV. At the time of the offer, the bid of 38.26 billion Swedish kronor (nearly $5 billion) represented a more than 30% premium over the company’s average share price over the past three months, according to Indap.

Shortly after the bid was announced, Gambro’s stock price surged to a value higher than the offered price, leaving some analysts to speculate that shareholders may see a higher bid. However, Investor CEO Borje Ekholm was quoted by AFX News as saying the company had no intention of raising its bid and that “the Gambro offer is fair.”

Indap reports that Investor is the largest shareholder in Gambro, with 19.9% of the company’s share capital and 26.3% of the voting rights. It has committed to transferring its shares to Indap. The company’s offer is conditional upon it being accepted to an extent that Indap takes control of more than 90% of the total shares of Gambro.

“By strengthening our ownership in Gambro, we can facilitate the execution of growth-orientated value creation measures,” said Ekholm. “This is more-easily implemented in a private setting as it enables the owners and management to take a longer-term investment horizon. The transaction also has a direct positive effect on Investor’s financial position.”

The acceptance period for the offer, which stands at SEK 111 per share, is expected to run until May 10. Since the bid was announced, Gambro’s share price has ranged between SEK 110 and 113.5.

EQT’s von Koch: Promoting privatization.

“We believe that Gambro, in this stage of its life cycle, will benefit from being privately owned, and that Investor and EQT are well suited to accelerate the development of the group,” said Thomas von Koch, senior partner at EQT Partners AB, the company’s investment division.

In 2004, Gambro agreed to divest its U.S. dialysis clinics business, Gambro Healthcare U.S., to DaVita Inc. (El Segundo, CA), the largest independent provider of dialysis services in the United States, for approximately $3.05 billion in cash. The move came after Gambro Healthcare pled guilty to felony charges and agreed to pay $350 million in criminal and civil fines to resolve federal healthcare fraud charges. The company’s renal products and blood-component business units were unaffected by the divestiture.

Earlier this year, Gambro reported that it had received a warning letter from FDA related to its monitor-manufacturing facility in Medolla, Italy. The letter reflected FDA’s concerns about the safety of the company’s Prisma kidney hemodialysis systems and the adequacy and effectiveness of the production unit’s quality systems. In addition to the letter, FDA issued an import alert that called for the detention of Gambro’s monitor products—Prisma, Prismaflex, and Phoenix—shipped into the United States. Gambro reports that its senior executives recently met with senior FDA officials to address the agency’s concerns.

© 2006 Canon Communications LLC

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