The Hindu Business Line : Strides Arcolab set to take majority stake in Australia’s Genepharm

Bangalore, Feb. 8 Strides Arcolab Ltd on Friday said it had raised its stake in Australian generics company Genepharm and was set for a majority holding of 55 per cent shortly subject to approvals.

In turn, it will surrender its south-east Asian operations (excluding China and Japan) to Genepharm.

The transaction gives Strides a significant presence in the highly regulated Australian market.

The Bangalore-based generics company now holds 19.8 per cent in Genepharm after picking up 17.7 per cent from a Cyprus-based group of investors in Genepharm; it already held 2.1 per cent interest in the Australian company.

“On successful completion of the Genepharm transaction, Strides may emerge with a shareholding of approximately 55 per cent of the expanded capital base of Genepharm,” Strides said in a release.

Genepharm Australasia Ltd, maker of cosmeceuticals, was formed in 2003 and is the second largest generics company listed on the Australian bourse. Post-deal, their combined regional businesses are put at A$100 million (around Rs 350 crore).

“Strides has entered into a heads of agreement with Genepharm Australasia Ltd under which Strides will vend its Australian and Asian business in exchange for the issue of shares in Genepharm, subject to approval by Genepharm shareholders,” it said.

Strides’ CFO, Mr Ravi Seth, said it was a cashless deal between the companies, though there would be a transaction with the Cyprus investors. Genepharm has enlisted KPMG to give an independent report. Mr Seth said the transaction would hinge on due diligence by both and an EGM of Genepharm shareholders will be held in May.

The Cyprus group is associated with Genepharm’s largest shareholder, Genepharm Asia Pacific Enterprises Ltd (GAPE).

The move with Genepharm comes on the heels of another, but much larger partnership deal with Aspen in November 2007: for the UK and Latin American markets.

Mr Arun Kumar, Vice-Chairman and Managing Director of Strides, said, “We expect that Genepharm’s sales and marketing expertise will help accelerate the growth of the Australian and Asian businesses.”

Mr Dennis Bastas, Chief Executive Officer of Genepharm said: “This represents an excellent opportunity for Genepharm to build scale and diversity” to create a premium healthcare business in the Australian and Asian regions.

Strides will surrender its manufacturing, OTC distribution operations across Singapore, Malaysia, Thailand, Vietnam, Hong Kong and Australia. For the year ending June 30, 2008, their revenue forecast is for A$32.5 million (around Rs 114 crore) with EBITDA of A$7.4 million (around 25 crore). These businesses have been valued at A$65 million (around Rs 227 crore).

It will also surrender regional sales, marketing and manufacturing operations of Jurong-based DHA - Drug Houses of Australia (Asia) Pte Ltd - which it acquired in late 2006 for S$19.7m. DHA will become Genepharm’s Asian hub.

Genepharm does sales and distribution of OTC products with an estimated market share of 11 per cent in its markets. For the financial year ended June 2007, it reported revenues of A$55 million and EBITDA of A$5 million.

The two have proposed a five-year preferred supply agreement in their respective bases. This excludes Strides’ products for AIDS, tuberculosis and malaria in Australia, New Zealand and the south-east Asian regions. They have agreed on payment of a break-fee of A$500,000 if the transaction fails under certain conditions.

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