Strides Arcolab and Aspen Pharma of South Africa have struck multiple equity deals designed to leverage each other’s presence and strengths in markets and niche areas.
Companies enter into series of transactions
HYDERABAD: Strides Arcolab and Aspen Pharma of South Africa have struck multiple equity deals designed to leverage each other’s presence and strengths in markets and niche areas.
As per the arrangement, announced on Tuesday, the R4 billion ($650 million) Aspen will get access to the Latin American markets after picking up a 50% interest in Strides’ operations in the region through a $58.5 million purchase of equity from the latter’s subsidiary and issue of fresh shares worth $94 million.
Currently, 25-30% of Strides business comes from its Latin American operations which is valued at Rs 1,000 crore.
The equity sale to the South African giant will make the subsidiary debt-free and create a war chest for growth, Arun Kumar, vice-chairman and CEO, Strides, said.
Aspen and Strides will also enter into a 50% joint venture to develop, manufacture and commercialise oncology products for the global markets.
For this, Aspen will purchase 50% share capital in Strides’ subsidiary Powercliff for $25.75 million apart from subscribing to 49% share capital of another subsidiary Onco Therapies Ltd, and through debt instruments for $16.7 million.
A new oncology unit coming up in Bangalore at a cost of $32 million has been valued at $85 million given the large pipeline of products being developed. In the first phase over the next 18 months the company will launch 32 products, he told reporters.
On its part, Strides will acquire a 51% interest in Aspen’s UK subsidiary Co-pharma Ltd, by picking up equity worth £2.25 million ($4.53 million) from the South African company apart from subscribing to new shares worth £375,000 ($772,997.67).
Co-Pharma, which had a turnover of £10.4 million (US $21.7 million) as of year ended June 2007, sells a range of commodity generics products in the UK and will provide an effective front-end for Strides in the highly competitive UK generics market.
The Bangalore-based Strides will also acquire 80% equity in Aspen’s 100% nutraceuticals subsidiary Formule Naturelle (Pty) Ltd for $5 million. Formula Naturelle (Pty) Ltd will then acquire the subject business from Aspen for the funds raised by way of the subscription.
Aspen currently has a nutraceuticals and health products business worth Rs 24 crore ($6 million) selling through pharmacies and major retail chains in South Africa under brand names as Formule Naturelle.
It fits in well with Strides’ soft gelatins capsules business in India and the brand can be leveraged for the global markets.
”It will also release substantial cash investments made by Strides for working capital for the operations apart from resulting in net cash flows of over Rs 300 crore for the group in the near term after acquisition costs,” he added.
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