Japan’s Meiji buys Bangalore-based Medreich for $290 mn

Mumbai: Meiji Holdings Co. Ltd has acquired Medreich Ltd, a Bangalore-based pharmaceutical company, for $290 million (around 1,720 crore) through its pharmaceutical arm, the Japanese company announced on Wednesday.

The transaction will also provide an exit to Singapore government’s investment arm Temasek Holdings Pte Ltd, which had invested ₹ 109 crore in Medreich for a 25% stake in 2005.

Meiji Group deals with manufacturing and sale of dairy products, nutritionals, confectionary and pharmaceutical products. The group conducts its pharmaceutical business under Meiji Seika Pharma Co. Ltd, which manufactures anti-infective drugs, therapeutic drugs for central nervous system and generic drugs. Post acquisition, Medreich will be a subsidiary of Meiji Seika Pharma.

Meiji Seika Pharma said in a notice to the Tokyo Stock Exchange that it will acquire all outstanding shares of Medreich held by its Indian promoters through Med Holdings (UK) Ltd, Nokha Holdings Pvt. Ltd. It also said Meiji will buy shares from V-Sciences Investments Pte Ltd, an investment vehicle of Singapore’s Temasek.

The acquisition will help Meiji expand its generic drugs portfolio and gain a foothold in India. It will also help Meiji leverage Medreich’s geographical reach.

Medreich manufactures and markets a range of pharmaceutical preparations across categories such as cardiovascular, diabetes, anti-fungal, penicillins and respiratory, among others. The firm manufactures formulations for multinationals such as GSK, Pfizer, Sanofi Aventis, Wyeth, Adcock Ingram, Mylan and Actavis and has a client base across 54 countries.

The firm had been looking for a private equity or strategic investor in 2013. Apart from providing an exit to Temasek, three promoters of Medreich were also keen on selling their stake. Medreich’s three promoters are Rajeev Mehta, Keith De Souza and C.P. Bothra.

NM Rothschild and Sons advised Medreich on the transaction.

Meiji’s acquisition of Medreich will be another inbound Japanese deal in Indian pharmaceutical sector. In 2008, Japan’s Daiichi Sankyo Co. Ltd acquired a 63.9% stake in Ranbaxy Laboratories Ltd for $4.2 billion. The deal, however, turned into a loss making proposition for the Japanese firm as the US drug regulator Food and Drug Administration (FDA) pulled up Ranbaxy for poor compliance at its factories. In April, Daiichi decided to sell Ranbaxy to Sun Pharmaceutical Industries Ltd in a $3.2 billion all-share deal. The acquisition will make Sun Pharma the fifth largest generic drug maker in the world.

India is one of the biggest markets for generic drugs. Global pharmaceutical firms are looking to buy stake in Indian firms in a bid to have a pie in the global generics market. According to Lucintel, a research firm, the generics drug market size is poised to reach $335 billion globally by 2017 on the back of demand from the US and emerging markets.

There are likely to be more such investments, acquisitions and joint ventures by Japanese firms in the Indian pharmaceutical space, according to Sujay Shetty, executive director, pharmaceuticals and life sciences at PWC India, a consultancy.

“Acquiring stakes in Indian pharmaceutical firms not only provides access to Indian markets but also allows Japanese firms to gain expertise in generic drug manufacturing,” Shetty said. “Also, as a part of the economic cooperation agreement between India and Japan, more Japanese firms will exhibit interest in Indian pharma companies. Not only will it help Japan in bringing down its ballooning healthcare expenditure but also strengthen the economic relations between the two countries.”