Mumbai: The world’s second largest drug maker by sales Pfizer Inc.’s proposal to buy part of the businesses of troubled Indian drug maker Wockhardt Ltd may be entering the home stretch with Pfizer’s top executives, led by its regional president for Southeast Asia Gerry Bacarro, scheduled to meet the senior management of Wockhardt in the last week of November in Mumbai, said a person familiar with the development.
Bacarro is responsible for business development, and mergers and acquisitions for Pfizer in South-East Asia and Korea.
The two companies have been in talks for several months after the financially stretched Wockhardt spelt out its decision to sell some of its non-core assets in 2008.
A Pfizer official confirmed that Bacarro is visiting the country this month and said his “programme would include meetings at a couple of local drug firms” and “discussions in connection with the business integration with Wyeth Ltd, the local arm of globally acquired Wyeth”. The official did not want to be identified as Bacarro’s trip and its agenda are confidential.
Photograph by Joe Tabacca / Bloomberg
A Pfizer spokesperson said, in response to a query on a deal with Wockhardt, that his company does not “comment on rumours and speculation”.
Pfizer had in January acquired global rival Wyeth in a $68 billion (Rs3.15 trillion) deal. The integration of the two companies is currently on worldwide. In India, both firms are listed on the stock exchanges and will remain separate for some time. Pfizer India managing director Kewal Handa also heads Wyeth here.
A Wockhardt spokesman said his company “is not in a hurry to sell any assets now” as it had already sold “businesses valued at Rs690 crore”.
“Meetings with corporate executives as well as merchant bankers is a routine affair. But it may not necessarily lead to a business deal,” he added.
The fund crunch in Wockhardt were mainly due to a Rs1,600 crore hit that the company took on its foreign currency derivatives; emergency repayment of short-term loans taken by pledging promoters’ equity and assets; redemption due on $110 million worth foreign currency convertible bonds; and severe shortage of working capital.
Following this, Wockhardt was referred to a corporate debt restructuring panel with its key lenders such as ICICI Bank Ltd, IDBI Bank Ltd and State Bank of India. Companies are referred to this when they are not in best of health and their loans to banks need to be recast by lengthening their maturity, cutting interest rate, or even through infusion of fresh debt.
According to the terms of the corporate debt recast package, Wockhardt has to sell off assets to the tune of Rs790 crore to repay the lenders by 2015.
Pfizer has been looking to expand in India. Already the fourth largest foreign drug maker in India, Pfizer is currently engaged in the prescription drugs business with several specialty pharmaceutical brands, and in animal health business.
The company plans to grow in India through the organic as well as inorganic route. Pfizer’s India strategy follows its global decision to concentrate more on emerging markets, including countries in South-East Asia, to sustain profitability in the future as its revenue growth in the established markets such as US and European countries has started to shrink.
Pfizer’s plans in India, according to two Mumbai-based merchant bankers who did not want to be identified, may include acquisitions of existing businesses and brands and strategic business alliances in complementary business areas such as biopharmaceuticals, consumer healthcare and generic product outsourcing for global markets.
Wockhardt, present in the Europe, US and several Asian markets through subsidiaries, posted net loss of Rs54.2 crore in the third quarter of 2009 on total sales of Rs922.7 crore, as against a net profit of Rs62 crore a year ago. It follows a January-December fiscal year.
The sixth largest drug maker in India by sales, Wockhardt has sold three of its businesses to multinational rivals since June. These deals included its German business to Mova GmbH, the India veterinary business to Vetoquinol SA of France, and the nutrition business to Abbott Laboratories Inc.
Wockhardt’s latest deal, which involved its nutrition business sale to Abbott, is, however, facing challenges from some of the company’s foreign lenders. Upset over the debt recast approval of the company by the firm’s Indian bankers, the foreign lenders have threatened to block the Rs630 crore Abbott deal, and filed a winding up petition in the Bombay high court. The petition was admitted by court in the first week of November.
Shares of Wockhardt lost 3.22% to close at Rs183.15 each on the Bombay Stock Exchange on Tuesday even as the exchange’s benchmark index Sensex rose marginally to close at 17050.65. Since March the stock has risen 167% from a low of Rs68.45.