Swedish drugmaker Recipharm AB has inked a deal to acquire Karnal-based sterile injectables maker Nitin Lifesciences Ltd. In the first part of the deal, it will buy 74 per cent stake in the privately held firm for SEK 872 million (Rs 671.2 crore or $103 million), on a cash and debt-free basis.
Recipharm will after a certain time have the option to acquire the remaining shares in Nitin, and the current owners, the Sobti family, will have the option to sell to Recipharm their remaining shares.
The valuation of the remaining shares will be based on Nitin’s EBITDA performance until the options are exercised.
In the current deal, Nitin is valued at Rs 907.1 crore, 12.4 times last 12 months’ (ending August) EBITDA of Rs 73.2 crore.
"The Indian market is particularly attractive showing high growth levels, and the transaction firmly establishes Recipharm's EM strategy. Nitin Lifesciences can also be used as a platform for entry into other regions,” Recipharm CEO Thomas Eldered said.
The acquisition is expected to be completed in Q1 2016 once FIPB approval comes through, he added. FIPB is the nodal body seeing foreign investment in India.
"We believe that with the support and network of Recipharm, we shall be able to further expand and continue to grow both domestically and outside the Indian market," Nitin Lifesciences' CEO Chetan Sobti said.
Chetan Sobti will continue as CEO and Nitin Sobti will remain as COO of the company.
Launched in 1994 by MM Sobti and late MV Kakkar, Nitin manufactures and markets pharmaceutical products. Its products include dry injections, liquid injections, eye and ear drops and veterinary injections.
The firm also produces formulations in the segments of antimalarials, antiemetics, antibiotics, analgesics, antiarthritics, antidiabetics, cardiac care, cough and cold therapy, dermatology and neuropsychiatry. It is also engaged in contract manufacturing of liquid ampoules, liquid vials, sterile dry powder, multi-dose eye and ear drops for Indian and foreign drug makers.
Apart from Karnal, Nitin has a facility at Paonta Sahib in Himachal Pradesh. It employs approximately 500 employees across three units at the two locations.
For the 12-month period ending August 31, 2015, Nitin reported sales of Rs 316.9 crore and an EBITDA of Rs 73.2 crore translating into an EBITDA margin of 23.1 per cent. Its EBITDA margin has been between 19-24 per cent during the last three financial years and margin is expected in the lower end of this range in the coming years. However, this is still higher than the margins commanded by Recipharm and would be earnings accretive for the mid-sized Swedish company.
Nitin is essentially debt free and since FY12 has reported a CAGR of revenues of over 20 per cent. It expects this growth to moderate in the coming years, however.
The Swedish acquirer, which will finance the acquisition under the existing bank credit facilities, is looking at a more strategic play from this deal. It said the acquisition would create a platform for further growth into emerging markets and a significant presence in the expanding Indian pharma market and strengthens Recipharm’s position in sterile injectables business.
This is the second largest inbound acquisition in the pharma sector this year after US-based generic drugmaker Mylan Inc struck a deal to buy a part of female health care businesses from Mumbai-based privately held firm Famy Care Ltd for up to $800 million (around Rs 4,950 crore). The fourth-biggest in-bound M&A in the pharma sector ever in India, which is yet to close, came just over a year after Mylan executed an even larger deal to buy Agila from Strides Arcolab for $1.65 billion.
Famy Care is a specialty women’s health care company with global leadership in generic oral contraceptive products (OCPs).