Mumbai: In the the biggest buyout by an Indian pharma company in Europe, Ahmedabad-based Intas, the largest privately held drug maker in the country, has acquired Actavis Generics in the United Kingdom and Ireland for pound 600 million (about Rs 5,100 crore) from Israel’s Teva in an all-cash deal. This is also the biggest Indian investment into the UK after the Brexit vote.
The transaction is part of the European Commission’s anti-trust divestiture requirements arising from Teva Pharmaceuticals’ acquisition of Actavis Generics from Allergan last year. Teva, the world’s top generics player, had acquired Ireland-based Allergan’s unit for $40 billion. The Actavis deal will catapult Intas into the top league in the UK and Ireland generics market. A consortium of banks is extending a five-year loan to Intas Pharmaceuticals, which is routing the acquisition through its fully-owned subsidiary Accord Healthcare.
“Actavis has been consistently number one or two in the UK and Ireland generics market, and very profitable. We are paying a premium for a clean asset with strong management team which will stay on,” Binish Chudgar, vice chairman and MD, Intas Pharmaceuticals, told TOI on phone from London. “For a pharma company, the margins improve significantly if it’s in the top four league in any market,” he added.
The annual revenue of Intas, among India’s top 10 pharma majors, is estimated at over $1 billion with 60% coming from international operations. Singapore’s Temasek and ChrysCapital are current investors in the company.
Actavis focuses on providing high quality generic products to both pharmacies and wholesalers in the UK and Ireland through a network of over 600 staff. It is also supported by a strong manufacturing presence in Barnstaple, North Devon, which provides contract services to third parties as well. The company generated over pound 250 million of sales in 2015, while the standalone revenue of Intas was just under $50 million. With this acquisition, Intas will doubl its revenue from European operations to $500 million.
Chudgar said Intas has the option to raise capital from its existing private equity investors, but would not prefer to sell more stake at the moment. “We are a zero-debt company and have loan commitments firmed up. The five-year borrowing from the banks has an annual repayment option, and the asset we are acquiring is profitable. So, even if I were to take $1 billion loan, I could fully repay it in the fourth year,” he said.
Indian drug makers have been aggressively chasing overseas deals in the past 18 months. Lupin acquired the privately-held US-based GAVIS Pharmaceuticals for $880 million last year, while Dr Reddy’s paid $350 million to purchase eight US drugs from Teva and Allergan earlier this calendar. This is a stark contrast to the dominant narrative of several Indian pharma companies selling out to bigger foreign rivals in the past decade.
Intas has its footprint in about 70 markets globally but garners most of its export revenue from the UK, Europe and the US. The Barnstaple plant that comes with the latest acquisition will become the company’s fourth in the UK, giving it robust local supply chains to service pharmacies, hospitals and wholesalers across the UK and Ireland and also into Europe.
The UK market is fiercely-competitive with the presence of almost all major Indian companies, with Wockhardt and Aurobindo having a sizeable presence. For Intas, getting a toe-hold to build market share, can be extremely lucrative with brands which are already established in the UK market.
Besides Wockhardt and Aurobindo, most Indian companies have built a presence in Europe like Dr Reddy’s, Torrent and Sun Pharma.
The European generics market is less preferred by Indian drug makers as compared to the US mostly due to the heterogeneous healthcare systems followed by different countries and a large reliance on tender-based procurement. But the demographics point to a clear opportunity for players who have vertically integrated manufacturing capabilities.
Source: Times Of India