The first acquisition, comprising Kemwell's U.S. and Swedish operations, is expected to close during the second quarter 2016, after review by the Swedish Competition Authority, while the second, comprising operations in India, is conditional on governmental approvals and expected to close before year end. The transactions will be financed by already available funds, existing credit facilities, a share issue in kind to the sellers and a proposed share issue of approximately SEK 850 million with preferential rights for existing shareholders.
The combined entity will have a significantly enhanced reach and scale. The Kemwell businesses to be acquired had 2015 preliminary net sales of approximately SEK 745 million, corresponding to 22% of Recipharm’s 2015 total net sales.
The acquisition price for Kemwell’s operations in the U.S. and Sweden amounts to approximately $85 million (SEK 693 million) on a cash and debt free basis, and will be paid to the sellers, Kemfin Holdings Private and, as regards the Swedish operations a minor additional owner, with approximately $30 million (SEK 243 million) in cash as well as through an issue in kind of class B shares in Recipharm corresponding to a value of $55 million (SEK 450 million).
All financial debt will be settled at closing of the acquisition. Recipharm will finance the cash portion of the purchase price through available funds and existing credit facilities.
The acquisition price for the operations in India amounts to $120 million (SEK 982 million) on a cash and debt free basis. The consideration will be paid in cash to the sellers, the founding Bagaria family and parties related to the family, at closing of the acquisition, which is expected to take place before year end. The final price will be subject to adjustments for changes in currency exchange rates. All financial debt will be settled at closing of the acquisition.
The purchase price will be financed through the proposed share issue of approximately SEK 850 million with preferential rights for existing shareholders expected to be completed by the end of the second quarter as well as through available funds and existing credit facilities.
The agreement also includes a right of first negotiation to acquire Kemwell’s Indian biopharma business, which is not included in the transaction and will continue to be retained by the sellers
The transaction is subject to governmental approvals, including approval from the Indian Foreign Investment Promotion Board (FIPB).
The Swedish business is located in Uppsala and employs around 210 people. It consists of two production units including a fully integrated primary and secondary manufacturing facility dedicated to a limited number of products, based on the same API and supplied essentially to one Big Pharma customer. There is also a small general pharmaceutical manufacturing unit. Manufacturing services offering include APIs, solids and semi-solid formulations.The US development business is located in Research Triangle Park, North Carolina, and employs around 50 people. There are about 120 customers and services include development of inhalation, liquid, semi-solid, solid and parenteral products with emphasis on early formulation work as well as development of analytical methods and testing. Recently, the business has also commissioned a GMP suite allowing for expansion into manufacturing of clinical trial material. The services are provided either on a stand-alone basis or as a more comprehensive pharmaceutical product development program.