ChrysCapital chief Ashish Dhawan-backed pharma company JB Chemicals & Pharmaceuticals has struck a deal to sell its Russia-CIS prescription products business to Dr Reddy’s Laboratories for Rs 137.5 crore ($30.5 million).
An affiliate of Dr Reddy’s Laboratories has also entered into a contract with JB Chemicals’ Russian subsidiary for purchase of its inventory for $3.9 million, the firm has said on Friday (July 22). Dr Reddy’s has also signed a deal to source finished products for the acquired business from JB Chemicals.
JB Chemicals scrip rose 1.13 per cent, to close at Rs 143.75 at BSE on Friday. The announcement was made after the market hours.
JB Chemicals has just sold its over-the-counter products business in Russia-CIS to Cilag GmbH International, an arm of the global healthcare giant Johnson & Johnson, for $260 million (Rs 1,170 crore) in cash. The sale included cough syrup brands Doktor Mom and Rinza.
Johnson & Johnson LLC and its affiliates will market these products in Russia, the world’s eighth largest OTC market, and in the Commonwealth of Independent States (CIS), as well as in other countries.
The deal involves Rs 938.51 crore, besides worldwide rights and registrations for the three brands – Rinza, Doktor Mom and Fitovit – for Rs 6.06 crore, and inventory and receivables worth $47 million. The deal also involves transfer of employees to the acquirer. This transaction has closed last week.
Commenting on the deal with Dr Reddy’s, JB Mody, chairman of JB Chemicals, said, “The decision to sell the remaining Russia-CIS business has been taken in overall interest of the company and the sale proceeds will help it pursue growth opportunities in domestic formulations, rest-of-the-world exports and contract manufacturing business.”
Bank of America Merrill Lynch acted as the financial advisor to JB Chemicals & Pharmaceuticals for both the transactions. Incidentally, Dr Reddy’s was also reported to be in the race to acquire the firm’s OTC products business, which was finally snapped by Johnson & Johnson.
Over two-thirds of JB Chemicals’ consolidated revenues of Rs 872 crore in FY2011 came from international market sales and the bulk of this was from the Russia-CIS markets. In fact, Doktor Mom is reportedly a brand worth Rs 200 crore. Sale of this business can almost halve JB Chemicals’ consolidated annual sales.
ChrysCapital chief Ashish Dhawan, who is an active investor in the capital market in his personal capacity, had raised his holding in JB Chemicals from 6.92 per cent to 8.03 per cent as of June 30, 2011.