Mumbai: KKR & Co. Inc. has agreed to acquire about 54% stake in Mumbai based drug manufacturer JB Chemicals and Pharmaceuticals, one of the oldest pharma companies in India.

KKR has agreed to acquire 41.7 million equity shares of JB Chemicals, representing 54% stake from the promoters of the company, said a company statement on Thursday. KKR will acquire the stake at a price of Rs.745 / share, a premium of 4% to the closing price of Rs.715 on BSE.

Post transaction, an open offer will be launched to acquire about 26% stake. Through the proposed open offer, KKR will acquire 20.93 million fully paid-up equity shares of JB Chemicals, representing 26% stake. The Open Offer is being made at a price of Rs 745 per Equity Share, said the company statement.

The total deal size is likely to go upto Rs 4600 crore ($610 million), depending on the success of the open offer.

The investment will be made through arms of KKR – Tau Investment Holdings Pte., Tau Holdco Pte. and KKR Asia III Fund Investments Pte. Ltd.

KKR & Co. Inc. has signed an exclusivity agreement to acquire Mumbai based drug manufacturer JB Chemicals & Pharmaceutcials Ltd, outbidding fellow private equity rivals PAG, Bain Capital and Apax in a keenly contested bidding war, ET fwaa the first reported on 15 June.

The JB Mody family, with several branches and associates, had initiated a formal sale process for a 56% stake. ET had reported binding bids from three PE suitors on June 11.

On Thursday, shares of JB closed at Rs.715.40, up by 1.4% on BSE. At present, JB has a market cap of Rs.5740 crore.

“We are thrilled that KKR – with its deep knowledge of the pharmaceutical industry and experience in investing in the sector, as well as its extensive investments in India – will take our mission forward and build on the foundation of core values that our family has instilled in this company. This will also create growth opportunities for our people to progress,” said J.B. Mody, Founder, Chairman and Managing Director of J.B. Chemicals.

“We believe J.B. Chemicals has an opportunity to accelerate its growth and leverage its strengths to enter into new therapeutic areas,” said Sanjay Nayar, Partner and CEO of KKR India. We look forward to working with the management team to build on the company’s strong foundation, and believe this investment underscores KKR’s ongoing commitment to India’s long-term economic prospects and the potential of its companies, he added.

Started as an active pharmaceutical ingredient (API) and formulations manufacturer in 1976, JB Chemicals ranks number 36 in the Indian drug market, with a net profit of Rs 182 crore and revenue of Rs 1,501 crore in FY19, according to pharma consultancy firm AWACS.

JB Chemicals owns India’s top ranitidine brand Rantac. Three brands – Cilacar (calcium channel blocker), Rantac (anti-peptic ulcerant) and Metrogyl (amoebicides) — feature among the top 200 in the country and account for more than 60% of domestic revenue. The company has a presence in 22 major therapeutic groups with 108 brands in the domestic market. In 2011, the company divested its over-the-counter (OTC) portfolio in Russia and other countries in the region to Johnson & Johnson.

Its generics are exported to 40 countries including US, UK, South Africa, Australia and Canada, while branded generics are exported to parts of Africa, Southeast Asia, the Middle East, and Central and South America. All told, this accounts for more than 30% of the company’s total turnover. The company has a domestic sales force of 2000 people.

Avendus Capital served as financial advisor to the Promoters of J.B. Chemicals, and Platinum Partners(Mumbai)

acted as legal counsel. Moelis & Company served as financial advisor, EY as accounting and tax diligence advisor,

and Shardul Amarchand Mangaldas & Co. and Simpson Thacher & Bartlett LLP acted as legal counsel to KKR.

ICICI Securities Limited will be acting as the manager to the public tender offer.

KKR, which has been investing in India since 2006, has deployed more than $13 billion through its PE vehicles in infrastructure funds and corporate and real estate-focused nonbanking finance companies (NBFCs). KKR’s large investments include Bharti Infratel, Coffee Day Resorts, Emerald Media and Max Financial Services.

This is the second KKR investment in last two months. In May, it agreed to invest Rs 11,367 crore ($1.5 billion) in Reliance Industries Ltd’s digital assets subsidiary Jio Platforms Ltd to acquire a 2.32% stake, its largest investment in Asia till date. Like several buyout groups, KKR too has been busy allocating money over the past few months, investing $18 billion since the coronavirus pandemic took hold.

Also, JB deal would be the fourth buyout of the New York based PE fund in India in last 2 years and the first acquisition of the PE fund this year.

In September, KKR India had acquired about 90% stake in education services provider EuroKids International while KKR-backed Indian hospital management company Radiant Life Care had acquired about 50% stake in Max Healthcare Institute from South Africa-based hospital operator Life Healthcare in June last year.

In February last year, KKR had acquired 60% stake in Ramky Enviro – a service provider in industrial waste management, municipal waste management and bio-medical waste management, for $510 million via a combination of primary and secondary investments.

KKR has been an active investor in the pharma and healthcare segment globally as well as in India, having backed Sydney-based GenesisCare and Laser Clinics; Metro Pacific Hospitals in the Philippines; China’s Kareway Health; Tokyo-based PHC and Radiant Life Care, which owns the Max chain of hospitals in India.

KKR has also invested in medical device companies such as AcuFocus, and Ajax, biopharmaceutical platform -BridgeBio Pharma, Gamma Biosciences, Slayback Pharma. In one of its most successful exits in the country, it had sold Gland Pharma in 2016 to Chinese company Fosun Pharmaceutical Group for $1.4 billion after holding the stake for three years.

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