McKesson working to end standoff over Germany's Celesio - sources

FRANKFURT (Reuters) - U.S. drugs wholesale group McKesson (NYS:MCK) is preparing to offer concessions to hedge fund Elliott to save its planned acquisition of German-based peer Celesio, three people familiar with the deal said on Wednesday.

Elliott, which has amassed a stake large enough to block the deal, has said it rejects the $8.3 billion bid in its current form.

"McKesson is budging, they are working actively on a solution," one of the sources said.

Celesio shares extended gains on the news and traded 4.3 percent higher at 23.40 euros ($31.84) at 1323 GMT.

McKesson in October offered 23 euros per Celesio share in a bid backed by Celesio's majority investor Franz Haniel & Cie (FHANI.UL), seeking to forge a global leader in drugs distribution to boost its bargaining power with pharmaceutical majors.

Time is running out because McKesson has set a Thursday night deadline for Celesio shares to be tendered. It has made its bid contingent on getting at least 75 percent of Celesio's shares, including those from convertible bonds.

San Francisco-based McKesson was not immediately available for comment outside business hours. Celesio and Elliott declined to comment.

It remained unclear whether McKesson was in contact with Elliott, directly or through intermediaries.

Debt-ridden Haniel has been urging McKesson to make the acquisition work and may even settle for a discount to any sweetened offer to remaining shareholders, two people familiar with the transaction said. Haniel declined to comment.

"A thought that has surfaced is that McKesson could pay Haniel a slightly lower price for its 50 percent stake and offer a premium to other shareholders," one of the sources said.

Haniel, a family-owned conglomerate, has been shedding assets to pay down its net debt, which stood at 1.6 billion euros at end-September 2013, and offset a massive writedown on its holding in German retailer Metro (MEOG.DE) in 2012.

Elliott has 25.16 percent of the voting rights in Celesio but when shares from Celesio's two convertible bonds are taken into account, the investor's voting stake is 22.7 percent, below the 25 percent it would technically need to block the deal.

However, some funds, which track share indexes, cannot tender their shares before completion of the deal and usually another small percentage of a company's shares are held in accounts, whose owners do not tender. ($1 = 0.7349 euros)

(Reporting by Alexander Hübner, Matthias Inverardi, Frank Siebelt and; Arno Schuetze; Editing by Ludwig Burger and David Evans)