Fresenius is to acquire the USA’s APP Pharmaceuticals in a deal that could be worth up to $4.6 billion and will give the German firm a major foothold in the North American intravenous generic drugs market.

Under the terms of the agreement, Fresenius will initially acquire the outstanding common stock of APP for $23.00 in cash per share (or $3.7 billion). The deal also involves a ‘contingent value right’ that could cost the Bad Homburg-based group an additional $970 million, or $6.00 per share in cash, if APP meets certain financial targets, payable in the second quarter of 2011.

Last year, APP had sales of $647 million and adjusted earnings before interest, tax, depreciation and amortisation of $253 million. This year, turnover is expected to rise to $730-$750 million and adjusted EBITDA of $285-$300 million.

The potential offer of $29.00 per share represents a premium of 63% over APP’s closing price on July 3. Fresenius will also assume all of the US firm’s outstanding debt which currently totals $940 million. It expects to close the deal at the end of 2008 or the start of 2009.

Ulf Mark Schneider, Fresenius chairman, said APP is “a fast-growing, highly-profitable company” which has “an excellent market position in the USA”. He added that the merger means the firm’s Fresenius Kabi unit will be able to market its range across the Atlantic and its international marketing and sales network will sell APP’s 100 hospital-based injectable products globally.

Fresenius added that it will finance the deal with a mix of debt and equity, and financing commitments have been received from Deutsche Bank, Credit Suisse and JPMorgan, The deal has been approved by APP's board, but still needs regulatory approval, and the latter has agreed to pay a termination fee if it pulls out of the deal and opts for a higher bid.