Two Indian cos. in race for the biggest Pharma acquisition

By agencies   |   Thursday, 01 September 2005, 19:30 IST
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MUMBAI: Wockhardt, which is believed to be considering making a bid for the generics business of U.S.-based Alpharma, is in the process of building up a war chest for what, if it comes off, could be one of the biggest acquisitions by an Indian company overseas. While two Indian pharmaceutical companies — Ranbaxy and Wockhardt — are in the race for Alpharma, Wockhardt will need to rely on external sources of funding for the acquisition. Wockhardt is believed to be in the process of forming a special purpose vehicle (SPV) which will be registered overseas. The company is said to be looking at a leveraged buyout and is in talks with a host of banks for the acquisition. Buying Alpharma could cost around $800 million. Sources said Wockhardt is in the process of forming a SPV which will be registered overseas. The company will put in an initial capital of $150-200 million into the SPV. Another $125-150 million is likely to be put in by a private equity fund, which may be ICICI Venture, the private equity arm of the ICICI Group. Other overseas private equity firms like Carlyle and Blackstone are also in the race. Wockhardt’s chairman, Habil Khorakiwala, could not be reached for comment. The company spokesperson said, “We don’t comment on speculation.” Ranbaxy has in the past said it has sufficient reserves and does not have the need for external funding. Sources too confirmed that Ranbaxy, being a cash-rich company might not consider roping in a strategic investor. Wockhardt’s share price gained 2.53 percent on the Bombay Stock Exchange; closing at Rs 533.45 on Wednesday while Ranbaxy closed at Rs 523.30, up by 0.49 percent. According to sources, Wockhardt has already sounded out foreign and private sector banks to raise debt for funding the SPV, if the bid goes through. Banks who are in the race for the debt portion include ABN Amro, Calyon, Citi, Deutsche Bank and ICICI Bank. The company is said to be looking at a debt portion of over $400 million. The money will be lent to the SPV from the overseas branches of the banks. Wockhardt incidentally had raised $110 million through an FCCB issue. Initial bids for Alpharma will be invited in early September. Sources also added that the acquisition price for the company is likely to be around one to 1.5 time sales. The generics business had sales of around $600 million last year. “While we believe Alpharma should be valued below its peers, based on products and pipeline, we think its present market cap at one times sales appears attractive,” S&P Equity Research said recently. This is likely to be Wockhardt’s first attempt at a major U.S. buy. So far, all its acquisitions have been in Europe. In May 2004, the company acquired esparma GmbH, a $20 million player in the German market, for $11million. Earlier, Wockhardt had acquired two companies in the U.K. The first was of Wallis Laboratory in 1998 and the second was of CP Pharmaceuticals in 2003. Europe is currently Wockhardt’s largest market accounting for 42 percent of sales. If either Wockhardt or Ranbaxy does manage to buy Alpharma’s generic business, it will be the biggest overseas acquisition in the history of Indian pharma. The largest overseas deal in the pharma space was announced in June when Hyderabad-based Matrix Laboratories acquired the Belgium-based Docpharma NV for $263 million.

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