Much more details in 1 yr old article…
It was on the block 1 yr earlier itself, but not officially acknowledged by the firm.
KKR may exercise its right of first refusal to match the highest bid and take over the company as per its current agreement with the Gland promoters. Alternatively, it can also opt for “put”, or the right to exit, if valuations cross the expected billion dollar mark, having more than doubled the value of its 18 month old investment.
The company reported an operating profit of about Rs 369.15 crore on sales of about Rs 1,029.45 crore in the year to March 31, 2014. Analysts, however, say such premium valuations could turn out to be a potential deal breaker. “They are largely a contract manufacturer and have out-licensed most of their products,” said a Mumbai-based pharma analyst with an FII.
However, Gland may leverage on the heightened interest in the space that coincides with global supply constraints of injectables—drugs that are widely used through vials, syringes and bags, as well as pumps used to deliver them and other fluids— that has driven many recent transactions both in India and overseas, including Pfizer’s $17 billion takeover of Hospira.
Moreover, there are very few injectable businesses left in India that are independently owned after Mylan acquired Agila from Strides Arcolab for $1.6 billion in 2013. Earlier in 2009, Hospira had acquired Orchid’s injectables business for $400 million. Mylan’s takeover of Agila was reportedly valued at 24 (x) EBITDA & 8 (x) revenues. Considering paucity of assets available, strategic buyers are willing to pay sizeable premium for regulated market-approved injectable assets and multiples are far more than the traditional 12-14 (x) EBITDA multiples for regulated market solid dosages assets, argue analysts.
The recent Pfizer-Hospira deal, as per industry sources, was at 20 (x) EBITDA and 4 (x) revenue multiple. Pfizer also paid a 39% premium to the prevailing market price, which significant by global standards.
The total global injectable market is estimated at around $144 billion, with the lion’s share being with innovators. The generic injectable sector is estimated at around $16.5 billion as per various industry estimates and is avery attractive piece going forward. Hospira, before the Pfizer buyout, was the clear global leader in the generic injectable space.
Possible Risk: One needs to be aware based on the past experience, as in the case of Ranbaxy/Sun where drug recalls were a precursor to eventual warning letters/OAI’s.
Disc: I had switched from Torrent to Alembic. Felt Alembic had better visibility and certainty. Did not feel there were enough acq. candidates with decent quality profile around in the 5k-10k cr. range.