Home >companies >Aurobindo to buy Actavis’s loss making European business

Mumbai: Hyderabad-based drug maker Aurobindo Pharma Ltd said on Saturday that it has signed a binding offer to acquire commercial operations in seven Western European countries from Irish multinational drug maker Actavis plc for €30 million.

Closing of the transaction is conditional on certain antitrust approvals and completion of employee consultation processes, Aurobindo Pharma said in a statement. The Actavis business that is to be acquired by Aurbindo had a sales of €320 million in 2013, but it is making losses for the last several years.

Total consideration is expected to be around €30 million and will depend upon the cash and net working capital position at closing. Aurobindo plans to fund the acquisition through internal accruals, Aurobindo said.

As part of the deal, Aurobindo expects to acquire personnel, commercial infrastructure, products, marketing authorizations and dossier license rights in seven European countries. Actavis and Aurobindo will be entering into a long term commercial and supply arrangement in order to support the ongoing growth plans of these businesses.

The acquisition expands Aurobindo’s front-end operations into five segments (generics, prescription products, over-the-counter products, hospital products and generics government tenders) with approximately 1200 products and an additional pipeline of over 200 products.

The businesses to be acquired provide a broad Western-European pharmaceuticals platform including personnel, commercial infrastructure, products, marketing authorizations and dossier licenses. For aurobindo, it complement existing Aurobindo European operations, adding capabilities in France, Italy, Spain, Portugal, Germany, Netherlands and Belgium. It will also provide a ready made hospital sales infrastructure for Aurobindo to launch its own injectable and speciality portfolio across Western Europe.

“The Actavis deal should ideally accelerate Aurobindo’s strategy of pursuing growth in European and international operations, providing critical scale and elevating it to one of the leading companies in the generic markets in these region," said sector analyst with a foreign brokerage, who didn’t want to be identified.

Aurobindo estimates the net sales for the acquired businesses would be around €320 million in 2013 with a growth rate of over 10% year-on-year. Although these businesses are currently loss-making, Aurobindo expects them to return to profitability in combination with its vertically integrated platform and existing commercial infrastructure.

“The acquisition of these European businesses is a value enhancing and forward-looking initiative for Aurobindo," said V Muralidharan, senior vice president of European operations for Aurobindo.

He added that “We have been clear about our intention to focus on growth initiatives in Europe and international markets, which together are expected to be key drivers for future growth. This transaction will complement our strategy of pursuing organic growth along with value-creating acquisitions within our served markets and adding complimentary growth platforms to provide scale and revenue diversity."

“We believe that the value created by the commercial operations in these seven markets will be better maximized by Aurobindo, which will gain scale, additional products and enhanced competitive market share position as a result of this transaction. This transaction will permit Actavis to focus management time and resources to support accelerated investment in driving faster growth of other markets, including Central and Eastern Europe and Southeast Asia" said Sigurdur Oli Olafsson, president of Actavis Pharma.

Jefferies International Ltd acted as sole financial advisor and Herbert Smith Freehills LLP acted as legal counsel to Aurobindo. Rothschild and Latham and Watkins acted as sole financial adviser and legal counsel to Actavis, respectively.

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