Home / Companies / Aurobindo Pharma to acquire Natrol for $132.5 million

New Delhi: Indian drug maker Aurobindo Pharma Ltd has emerged the highest bidder in a bankruptcy auction of nutritional supplement maker Natrol Inc. and its affiliates.

The Hyderabad-based firm made the $132.5 million offer via its US subsidiary Aurobindo Pharma USA Inc. on 10 November, it said in a stock exchange announcement on Wednesday.

“Earlier during the year, Natrol Inc. filed for bankruptcy after a US judicial panel consolidated several class actions accusing the health supplement maker of false marketing of its joints (pain) relief products," said Sarabjit Kour Nangra, vice president of research-pharma, Angel Broking Ltd.

Natrol, acquired by Mumbai-based Plethico Pharmaceuticals for $81 million in 2007, sells nutritional supplements in the US and other international markets. Some of Natrol’s branded products are in segments such as weight management, hair and skin care; and health supplements such as vitamins and minerals.

“We believe that Natrol is an excellent strategic fit and provides the right platform for creating a fully-integrated OTC (over-the-counter) platform in the USA and in other international markets," Aurobindo Pharma said in the statement.

Natrol will provide a strong brand reputation and presence in the attractive supplements markets, has long-term relationships with key distribution and retail partners and a proven performance in mass market, health food and speciality channels, Aurobindo said.

“Given the size of Aurobindo, the acquired company will form around 4-5% of sales and profitability of fiscal year 2016. The acquisition overall will not have a major impact on the numbers, though providing the company an entry into potential high growth markets," Nangra said.

The acquisition is subject to final approval by the US court and other statutory approvals.

Barclays Plc acted as the sole financial advisor and Sullivan and Cromwell LLP as the legal counsel for Aurobindo USA.

“On the valuation front, given that the Natrol has been reported to have an overall debt of $69 million, the company has been acquired at around two times EV/sales (enterprise value to sales), which is reasonable. On the funding part, the company can easily fund the same, as the company has a comfortable debt to equity ratio of 1:1," Nangra said.

In 2010, the US nutraceutical (a word coined by combining nutrition and pharmaceutical) market was worth an annual $50.4 billion by sales and by far the largest nutraceutical market in the world, according to a report by researcher Frost and Sullivan.

“As a trend, Indian pharma companies have been looking at acquisitions overseas for geographical expansion, entering new markets and expanding their research and development capabilities," said Nimish Mehta of Equirus Research. “With this acquisition, Aurobindo is getting into a new territory with selling OTC products like nutraceuticals which is a heavily brand dependant market," he said.

Aurobindo Pharma shares rose 3.07% to 1,059.65 on Wednesday, while the benchmark Sensex rose 0.38% to 28,008.90 points.

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