Mumbai: Drug maker Strides Arcolab Ltd has agreed to sell its injectables unit Agila Specialties to Mylan Inc., one of the world’s top generic drug makers, for a total of $1.6 billion (about Rs.8,500 crore).
Under the agreement, Strides will receive another $250 million in the future, based on certain conditions, the company informed stock exchanges on Thursday.
Agila, which makes and sells anti-infective injectables with a market presence in the US and parts of Europe, is currently the core business unit of Strides. It had sales and profit of $255 million and $86 million, respectively, in the year ended 31 December.
The Mylan deal values Agila at 6.2 times sales and 18.7 times profit, based on the initial $1.6 billion cash consideration, according to analyst Hitesh Mahida of Fortune Equity Brokers (India) Ltd.
Strides had in January 2012 sold a 94% stake in its Australian subsidiary Ascent Pharma to another US generic drug maker Watson Pharmaceuticals Inc. for A$375 million.
Of the $1.85 billion ($1.6 billion cash upon the closure of the deal and another $250 million after six months on certain conditions) that Strides will receive from the deal, the company will distribute at least $700 million to shareholders and spend about $400 million towards repaying debts and other expenses related to employee compensation among others.
In a conference call, Strides’ senior management on Thursday said that there is no clarity on the amount of tax on the deal as of now. After the tax and the other expenditure including the repayment of debts, there won’t be much of cash balance in the company’s books.
Also, the mode of distribution to shareholders has not been decided yet. “It could be through a share buyback or dividend payout or any other way of paying back to the shareholders, who contributed to the growth of the company,” said Stride’s vice chairman and group chief executive officer Arun Kumar.
“Our investments in the Agila business, together with the operational excellence of our employees, have led to the creation a global, high-quality specialty injectables business with an industry-leading pipeline and best-in-class infrastructure. We believe Agila, its partners, customers and employees across all of its markets will benefit significantly from Mylan’s global reach and strong position in the global generic and specialty pharmaceutical sector,” he said.
Mylan’s chief executive Heather Bresch said in a release that “The addition of Agila to our existing injectables platform will immediately create a new, powerful global leader in this fast-growing market segment and accelerate our target of becoming a top-three global player in injectables.”
“With the deal, Mylan will have a combined portfolio of more than 700 marketed injectables and a global pipeline of more than 350 injectables products pending approval,” said Mylan India president Rajiv Malik adding that Agila will further expand Mylan’s geographic footprint, providing Mylan with entry into key growth markets, such as Brazil.
According to Mylan’s chief financial officer John Sheehan the company anticipates that the acquisition will immediately enhance its revenue and earnings growth upon closing, and nearly double the business from injectables in the first full year.
Shares of Strides, which announced the deal in the morning, fell 6.78% to close at Rs.917.80 on BSE on Thursday, while the Sensex dropped 1.52% to 18,861.54 points.