In the largest overseas acquisition by an Indian pharmaceutical company, Hyderabad-based Matrix Laboratories Ltd is acquiring a controlling stake in Docpharma NV, one of the leading generic drug companies of Belgium, in a deal that can cost up to $263 million.
This is more than three times the $85 million paid by Ranbaxy Laboratories Ltd in early-2004 to acquire RPG Aventis SA, the France-based generic arm of Aventis.
Matrix signed a share purchase agreement with the promoters of the Belgian firm, the Van Rampoy family, in Hyderabad on Sunday to buy 1,370,085 shares at 34 euro apiece, representing a 22 per cent stake.
The agreement is scheduled to close by July 8, after which Matrix will acquire control over Docpharma. Matrix will follow it up with an open offer to the Docpharma shareholders for the remaining 78 per cent stock at the same price in accordance with Belgian takeover regulations.
According to Matrix chairman and CEO N Prasad, the price of 34 euro per share represented a premium of 19.3 per cent on the average Docpharma share price for the last one-month and a premium of 13.3 per cent on the last trading price on June 17, 2005.
"With this acquisition, our European strategy will kick-start," Prasad told media persons. Once the acquisition was completed, Prasad pointed out, two-thirds of the combined entity's revenues would be generated in the regulated markets, with around half of the total revenues being generated in Europe alone.
"This will make the combined entity a leader among the Indian pharmaceutical companies with significant European sales," he said.
Docpharma's chief operating officer, Stijn Van Rompay, said, "The new combination provides us a new platform to drive our business."
Prasad said Matrix would retain Docpharma's brands and trade names in the latter's markets. Both companies have agreed that Docpharma's founder Leon Van Rompay and Stijn Van Rompay would remain CEO and COO of the company respectively for at least five years. Matrix has the option to convert 65 per cent of Rompays equity into company shares.
Further, Prasad said Matrix had to borrow around $160 million to finance the transaction after taking into account its internal accruals of $35 million, Docpharma's net cash position of an additional $35 million and deferred payment of $25.02 million.
Docpharma's Leon Van Rompay and family have agreed to a deferred payment for 65 per cent of their consideration amounting to $25 million.
Established in 1999, Docpharma is currently selling 50 registered markets products in Europe and plans to launch over 80 products in the next 24 months in its key countries -- Belgium, Luxemburg, France, Italy and Netherlands.
Explaining the rationale behind the acquisition, Prasad said the combined entity would integrate Matrix's manufacturing capacity with Docpharma's strong marketing and distribution platform in key growing markets within southern Europe, making it one of the select few generic pharmaceutical companies that have the abilities to compete on the basis of cost advantage as well as marketing differentiation.
Prasad said Docpharma and Matrix's operations were extremely complementary with very limited overlap in their respective businesses.
"Docpharpha does not have any manufacturing operations that requires integration or rationalisation within the new organisation, while its marketing and distribution platform represents an entirely new avenue of revenue generation for Matrix," he added.
Docpharma's acquisition is the second significant strategic transaction announced by Matrix this month. On June 1, Matrix and Strides Arcolab Ltd announced their intention to merge.
The two companies are currently in the process of carrying out due diligence which, according to Prasad, is likely to be completed in a span of four weeks.
Magic pill
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Matrix buys 1,370,085 shares at 34 euro apiece, representing a 22% stake.
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Once the agreement closes by July 8, Matrix acquires control over Docpharma.
- Matrix will follow it up with an open offer to Docpharma shareholders for the remaining 78% stock at the same price.
