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Home Market News Recipharm creates a global CDMO leader through SEK 1.7 billion strategic acquisitions in the US, Sweden and India
News
18 Apr 2016

Recipharm creates a global CDMO leader through SEK 1.7 billion strategic acquisitions in the US, Sweden and India

The company signs two separate agreements to acquire Kemwell’s pharmaceutical contract development and manufacturing (CDMO) businesses.

The first acquisition, comprising US and Swedish operations, is expected to close during the second quarter 2016, after review by the Swedish Competition Authority, while the second, comprising operations in India, is conditional on governmental approvals and expected to close before year end. The transactions will be financed by already available funds, existing credit facilities, a share issue in kind to the sellers and a proposed share issue of approximately SEK 850 million with preferential rights for existing shareholders.

Highlights

  • The combined entity will have a significantly enhanced reach and scale. The businesses to be acquired had 2015 preliminary net sales of approximately SEK 745 million, corresponding to 22% of Recipharm’s 2015 total net sales.

  • The acquisitions are expected to be accretive to EBITDA margin already from 2016 and are well in line with Recipharm’s overall financial objectives.

  • Adds US operational presence with strong development capabilities, enhanced technology base and broad customer portfolio, providing improved access to the world’s largest pharma market.

  • Expands position in emerging markets significantly, taking sales in these markets to more than SEK 800 million, dominated by sales directly to the fast-growing pharma market in India.

    • Major extension of Recipharm’s capabilities in India

      • Provides access to significant cost-effective development operation working with customers with strong US ANDA project pipeline

      • Adds US FDA and EU approved cost effective manufacturing options

      • Expands manufacturing capabilities, complementary technology to Nitin Lifesciences

      • Further strengthens Recipharm’s synergistic business model by aligning US and Indian development and technology operations with the combined company’s manufacturing capabilities in India and Europe. In addition, there are potential commercial synergies from enhanced customer offering and cross selling

      • Well established API and dose form manufacturing facilities in Sweden with opportunities for substantial cost savings and operational synergies

    • Strong combined cash flow generation expected to maintain financial profile in-line with financial targets

    • A share issue in kind of class B shares in Recipharm corresponding to a value of USD 55 million (SEK 450 million), subject to approval by the Extra General Meeting, and a proposed share issue of approximately SEK 850 million with preferential rights for existing shareholders.

    US and Sweden transaction

  • The acquisition price for Kemwell’s operations in the US and Sweden amounts to approximately USD 85 million (SEK 693 million) on a cash and debt free basis, and will be paid to the sellers, Kemfin Holdings Private Ltd and, as regards the Swedish operations a minor additional owner ("Minority owner), with approximately USD 30 million (SEK 243 million) in cash, as well as through an issue in kind of class B shares in Recipharm corresponding to a value of USD 55 million (SEK 450 million). All financial debt will be settled at closing of the acquisition. The number of shares in the issue in kind will be based on an agreed subscription price, calculated as the average of the volume weighted average share price for (i) 20 trading days prior to the day for signing of the acquisition agreement and (ii) 20 trading days prior to the date for the EGM, adjusted for non-occurring dividend for the financial year 2015. The share issue in kind requires that the Board of Directors receives the necessary authorization from Recipharm’s shareholders at an Extra General Meeting to be held on 10 May 2016.

  • Kemfin will become a meaningful shareholder in Recipharm. Kemfin and Minority owner have committed to a 12 month lock up period as well as undertaken to subscribe for their pro rata shares in the proposed rights issue.

  • Recipharm will finance the cash portion of the purchase price through available funds and existing credit facilities.

  • Closing of the transaction is expected to take place during the second quarter of 2016, subject to review by the Swedish Competition Authority. The transaction is also subject to confirmation from a third party regarding certain commitments.

    India transaction

  • The acquisition price for the operations in India amounts to USD 120 million (SEK 982 million) on a cash and debt free basis.6The consideration will be paid in cash to the sellers, the founding Bagaria family and parties related to the family, at closing of the acquisition, which is expected to take place before year end. The final price will be subject to adjustments for changes in currency exchange rates. All financial debt will be settled at closing of the acquisition.

  • The purchase price will be financed through the proposed share issue of approximately SEK 850 million with preferential rights for existing shareholders expected to be completed by the end of the second quarter (the “proposed rights issue”) as well as through available funds and existing credit facilities.

  • The agreement also includes a right of first negotiation to acquire Kemwell’s Indian biopharma business, which is not included in the transaction and will continue to be retained by the sellers.

  • The transaction is subject to governmental approvals, including approval from the Indian Foreign Investment Promotion Board (“FIPB”).

    • Thomas Eldered, CEO of Recipharm AB said: “These transactions represent a significant step in both the consolidation of the CDMO industry and the transformation of Recipharm into a global leader. We now have a US footprint which we can use to further penetrate the world’s largest pharmaceutical market and the business in Sweden provides us with several opportunities for synergies. When we receive the approval in India, Recipharm’s customers will have access to very cost effective development and manufacturing capabilities able to serve international markets including the US. I am extremely excited about these acquisitions and the benefits they will bring. The current Managing Director, Anurag Bagaria, and VP Corporate Development, Karan Bagaria, will continue in their current positions post closing and I am very much looking forward to working with them.”

    Anurag Bagaria, Managing Director of Kemwell commented: “I am delighted about the combination of Kemwell’s pharmaceutical business with Recipharm, both of which have many complementary capabilities. I am confident that together we will be even more successful and we look forward to building on our combined strengths.”

    PerÅke Oldentoft, Chairman of Kemwell AB and Managing Director of Kemfin commented: “I am really excited about the combination of the companies and I am sure that under the Recipharm umbrella the business will continue to grow and provide high quality products and services to its customers.”

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