US-based generic pharma company Mylan Laboratories will acquire up to 71.5 per cent of domestic pharma company Matrix Laboratories. Mylan is acquiring 51.5-per cent of Matrix from its current promoters and financial investors and will come out with an open offer for an additional 20 per cent.
The acquisition is being made at a price of Rs306 per share of Matrix. Depending on the success of the open offer, total cost to Mylan could be up to $736 million. There are no plans to de-list Matrix Labs from the domestic stock exchanges.
N Prasad, current chairman and promoter of Matrix, would sell part of his stake to Mylan, but would retain a 5 per cent stake in the company. He will join Mylan as director and a member of the executive management team as head of global strategies. N Prasad will invest $25 million in newly issued shares of Mylan.
Financial investors in Matrix, Temasek Holdings and Newbridge capital, have also agreed to sell out to Mylan. Subsequent to the completion of the deal, Newbridge and Temasek will invest $93 million and $46 million respectively in newly issued shares of Mylan Labs.
The current CEO of Mylan would become the non-executive chairman of Matrix and N Prasad, currently executive chairman of Matrix, would become the vice-chairman of the board. Rajiv Malik would remain as CEO of Matrix.
N Prasad and associates held a 17-per cent stake in Matrix as on 30 June 2006. Three entities controlled by Newbridge Capital held more than 25 per cent while Maxwell Mauritius, an arm of Temasek Holdings, held close to 13 per cent.
Among other investors, Merrill Lynch held more than 5 per cent while Goldman Sachs and Master Trust Bank of Japan held more than a per cent each as on 30 June 2006.
Mylan Labs, listed on the NYSE, is the second most valuable generic pharma company in the US with a market capitalisation of around $4.3 billion. The company had reported a net profit of $217 million on revenues of $1.29 billion for the last financial year.
The acquisition makes very good strategic sense for Mylan as it would help to integrate backwards. Mylan focuses on finished dosage forms (FDF) while Matrix is strong in active pharmaceutical ingredients (API), which are intermediary products, used to make FDF.
Matrix also has a strong marketing presence across many key markets. Apart from India, the company has significant operations in China and South Africa. Last year, Matrix had acquired a Belgian pharma marketing company DocPharma which gave it a good marketing network in Europe.
The combined entity would have more than 5,000 employees across 10 countries. The transaction is expected to be completed by last quarter of calendar 2006 and is subject to satisfaction of all conditions in the share purchase agreement and closing of the open offer.
Robert J Coury, Mylan's vice chairman and CEO commented, "This is an extremely complementary transaction that accomplishes a number of Mylan's key objectives. Mylan is executing on its commitment to establish a global platform and expand its dosage forms and therapeutic categories. Additionally, this acquisition deepens Mylan's vertical integration and enhances its supply chain capabilities. The transaction will allow Mylan and Matrix to strengthen and expand their core businesses and competencies, while creating significant opportunities for global expansion and growth."
"In addition to bringing substantial tangible benefits in the form of their world-class manufacturing capabilities and product portfolios, Matrix and their European subsidiary, Docpharma, have demonstrated a deep understanding of their respective regions and markets. We are very excited about the transaction and expect, based on our time together thus far, a smooth and effective integration. We have found that Matrix and Docpharma have cultures and values that are extremely consistent to our own at Mylan", Coury added.
Prasad said, "Mylan, a proven industry leader, is an ideal partner for Matrix. Our strategic vision remains unchanged and we believe this transaction creates greater growth opportunities for Matrix and its employees and also will allow us to accelerate our existing expansion plans in India and abroad."
Shares of Matrix opened at Rs298 on the NSE today as against a closing rate of Rs277.35 on Friday. The stock has come off its highs as the offer price is considerably below market expectations and is currently trading at Rs278.75.
also see : Update: Generic API
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