Global alternative asset manager KKR has agreed to purchase a controlling stake in JB Chemicals & Pharmaceuticals Ltd in its third private equity deal in India this year, the firms said on Thursday evening.
KKR will acquire at least 38.9% from the promoter Mody family for Rs 2,240 crore ($300 million) and make an open offer for an additional 26% of the company from the public shareholders. Depending on the success of the open offer, KKR may end up buying another 15% from the promoters to hold at least 54% stake in the company. This would cost it Rs 3,109 crore ($415 million).
If the entire quota is tendered in the public offer, KKR may eventually own up to 64.95% stake by shelling out a total of Rs 3,736.6 crore (almost $500 million). It would have the option to buy additional shares from the Mody family in the future as long it maintains the minimum public shareholding norms (25%).
The firm has inked the deal to buy shares of the company from the promoters as well as from the public at Rs 745 a share. This is a premium of 4% to the last traded price of the firm. JB Chemicals' shares closed at Rs 715.40 in a strong Mumbai market on Thursday. The deal was announced after trading stopped for the day. The company's share price has doubled in the last seven months.
The proposed deal in JB Chemicals has been in the news for the last one year.
The investment will come from its Asian Fund III, KKR said. KKR had raised $9.3 billion in its third Asian fund in 2017. It has backed several Indian firms from this fund.
“We believe JB Chemicals has an opportunity to accelerate its growth and leverage its strengths to enter into new therapeutic areas,” KKR’s India chief Sanjay Nayar said in a media statement.
JB Mody, the company’s founder and managing director, said that the KKR deal will create growth opportunities for the organisation.
JB Chemicals recorded 8% growth in revenues to Rs 1,774 crore and saw its net profit shoot up 40% to Rs 272 crore for the year ended March 2020 over the year ago period.
JB Chemicals supplies products in the cardiac, gastrointestinal and anti-infective therapeutic areas across the branded formulations market. The company’s portfolio includes four flagship brands in India, Cilacar, Metrogyl, Nicardia and Rantac. It also exports its branded formulations to more than 40 countries. JB Chemicals’ contract manufacturing capabilities also allow it to partner with large, international brands to develop a diverse range of innovative specialty products, including tablets, injectables, creams and ointments, lozenges, herbal liquids and capsules.
JB Chemicals is KKR’s second investment in the pharmaceuticals space, but its first control deal in this sector. It previously held a 33% stake in Gland Pharma, which was later sold to Fosun international.
In the healthcare sector, KKR is also invested in Max Healthcare. After the merger of Radiant Life Care with Max, the PE firm became a key shareholder of the merged public company.
This is KKR’s third deal in as many months after it put in close to $1.5 billion for a 2.3% stake in Reliance’s Jio Platforms in its largest Asia deal and struck a deal to buy some solar power assets from Shapoorji Pallonji Group for $202 million. The Jio investment is also from its Asian fund in addition to its global technology funds while the renewable energy transaction is from its infrastructure fund.
Avendus Capital served as the financial adviser and Platinum Partners (Mumbai) acted as legal counsel to the promoters of JB Chemicals.
Moelis & Company served as the financial adviser, EY as accounting and tax diligence adviser, while Shardul Amarchand Mangaldas & Co. and Simpson Thacher & Bartlett LLP acted as legal counsel to KKR.
ICICI Securities is the manager to the public offer.