Following Failure to Sell, Akorn Files for Chapter 11


Two years after Germany’s Fresenius Medical Care walked away from a 2017 $4.3 billion deal to acquire Akorn Pharmaceuticals, the Illinois-based company has filed for protection under U.S. bankruptcy laws as it attempts to restructure for a potential sale.

Akorn filed for voluntary protection under Chapter 11 to guide an in-court sale of its business while addressing what it called litigation-related overhangs. The company said it is attempting to place itself in the best position for long-term success under new ownership. Under the terms of the Chapter 11 agreement, Akorn has initiated a Restructuring Support Agreement with lenders representing more than 80% of its secured debt. Those lenders will collectively serve as a "stalking horse" bidder in the company's sale process and provide additional liquidity to fund the company's business operations during this process, Akorn said in its announcement. A stalking horse bid occurs when a bankrupt company selects an outside entity to make a bid for some of the bankrupt company’s assets. A stalking horse bid is usually undertaken to maximize the value of its assets. However, once the initial bid is made, other entities are free to make a bid for the assets as well.

Akorn announced plans to sell the company in February due to financial challenges following the failure of the Fresenius acquisition. Fresenius terminated its plans to acquire Akorn due to what it called “material breaches” involving data integrity requirements that were supposed to be reported to the U.S. Food and Drug Administration. Those requirements were related to the company’s operations, including product development.

Akorn disputed the claims made by Fresenius. And, after that company walked away from the deal, Akorn filed a legal complaint seeking to force Fresenius to fulfill its merger obligations.

Akorn Chief Executive Officer Doug Boothe said the decision to seek bankruptcy protection is a decisive and positive step for the company.

“We look forward to separating legacy litigation and debt from the Company's most valuable assets – our products, our people, our manufacturing facilities and our knowledge – so that we can move forward unencumbered by these liability exposures under new ownership that believes in our future,” Boothe said in a statement.

Akorn was able to secure commitments for $30 million to support its operations during the bankruptcy proceedings. In its announcement, Akorn said it is confident in the “underlying strength” of its business and plans to continue to operate as usual throughout the bankruptcy process. Akorn said it hopes to complete the sale process in the third quarter of this year.

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