Aspen Pharmacare expands in $1bn deal

August 2013 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

Aspen Pharmacare Holdings Ltd announced in June that it had agreed to acquire a number of drug brands and a manufacturing facility from American pharmaceutical company Merck & Co for around $1bn.

Aspenhas agreed to acquire Merck’s active pharmaceutical ingredient (API) business located in the city of Oss in the Netherlands, along with a portfolio of 11 branded drugs, and a satellite facility and office in the US. The manufacturing facility, currently known as the Dutch New Company, will be rebranded as Aspen Osso once the deal is complete. It will manufacture chemicals for specialist products in categories such as hormones, steroids and anti-coagulants. Under the terms of the deal Merck will continue to buy APIs from Aspen as part of a 10 year supply contract.

The drug brands recorded revenue of $248m in the financial year ended 31 December 2012, with more than half of that revenue generated in the emerging markets of Latin America and Asia Pacific.

In a statement announcing the deal Stephen Saad, chief executive of the Aspen group, said “One of Aspen’s primary strategic intents is to further globalise its business, increase its representation across a number of additional territories and provide support to its growing global presence with a differentiated pipeline. This transaction provides a platform to contribute to the achievement of this strategic intent by enabling Aspen to access a niche range of APIs and finished dosage products.” Aspen expects to complete the acquisition of the API Business by 1 October; the expected effective date of the products acquisition is 31 December 2013.

Despite having debts of around $1.03bn at the end of December 2012, and a current debt-to-equity ratio of around 75 percent, Aspen has confirmed that the acquisition will be largely funded by new debt facilities which, at the time of writing, had not yet been finalised.

The deal, which is dependent on the approval of the usual competition authorities and the South African Reserve Bank, continues Aspen’s aggressive expansion program of the last few years. Indeed, in recent months the company has made a number of acquisitions which have both strengthened its standing and broadened its offerings in Europe and the emerging markets, most notably across Latin America and Southeast Asia. Aspen already sells its products in over 150 countries.

Earlier in June the group announced it was in negotiations with GlaxoSmithKline (GSK), which currently owns an approximate 19 percent stake in Aspen, over the purchase of the Arixtra and Fraxiparine/Fraxodi brands of thrombosis drugs – except in China, Pakistan and India – as well as another manufacturing facility in France.

The potential GSK deal is also likely to be valued at around $1bn. In 2009 Aspen and GSK agreed to enter a number of strategic deals, enabling Aspen to acquire the rights to distribute GSK’s products in South Africa. In 2009 Aspen also completed the purchase of GSK’s manufacturing facility in Bad Oldesloe, Germany.

In 2011 Aspen also paid R6.1bn for the pharmaceutical business of Australian firm Sigma Pharmaceuticals in order to further boost the company’s expansion plans in the Asia-Pacific region. Aspen’s expansion continued in April 2013 when it agreed to pay $215m to Nestle SA for the rights to baby formula in southern Africa and Australia.

Established in 1997, Aspen is the largest maker of generic drugs in the southern hemisphere and Africa’s largest pharmaceutical manufacturer. The company has 17 manufacturing facilities at 12 different manufacturing sites across six different continents. Four of the sites are located in South Africa, four in Australia, and one each in Kenya, Tanzania, Brazil, Mexico and Germany.

The markets reacted positively to news of the deal. The day after Aspen announced the acquisition of the unit, shares in the company rose 6.13 percent.

Richard Summerfield