Relief for debt-ridden Elder; Torrent gets access to 30 brands

Ahmedabad headquartered Torrent Pharmaceuticals is set to buy Elder Pharmaceuticals’ branded drugs business in India and Nepal for about Rs 2,000 crore.

The transaction, which puts a lid on several weeks of speculation, helps bail out Mumbai-based Elder Pharma, saddled with debt of about Rs 1,300 crore.

Alok Saxena, Elder Pharma’s Managing Director and Chief Executive, said the agreement formalised between the two companies addressed recent challenges faced by Elder Pharma, besides significantly helping to de-leverage the company’s balance sheet.

Elder Pharma’s shares fell Rs 26.55, or 8 per cent, to close at Rs 298.30 on the BSE, while Torrent Pharma’s fell Rs 20.20, or 4 per cent, to Rs 479.50.

The Rs 1,400-crore Elder Pharma will now be left with its in-licensing deals, anti-infectives and exports business. The company has about 25 licensing partners whose products it sells in India. It will also continue to manufacture products at its manufacturing facilities and supply these to Torrent for up to three years.

The Rs 3,200-crore Torrent Pharma is the flagship of the Torrent Group. Its buyout of Elder’s domestic branded drugs business comes at a time when acquisition of local drug companies by foreign owners is being closely watched by the Government.

Earlier this year, Elder Pharma had said that it had appointed advisors to chart out different options to raise funds. The options included hiving off a business, selling brands or getting an equity partner.

Around the same time, sending conflicting signals to investors, Elder Pharma went ahead and acquired UK-based Max Healthcare for an undisclosed sum, marking its entry into the over-the-counter business.

Besides NeutraHealth, its fully owned subsidiary in the UK, it has a majority stake in Ghana’s Wincom Formulations and Bulgaria’s Biomeda OOD Ltd.

Crossover to Torrent

Torrent said it will fund the acquisition through a mix of internal accruals and bank borrowings. The transaction will strengthen its core prescription-based business, Sudhir Mehta, Torrent Group Chairman, said in a statement.

The transaction is expected to close in the first six months of 2014, subject to regulatory and shareholder approvals.

Elder’s domestic business has a basket of 30 brands in segments, including women’s healthcare, pain management, wound-care and nutraceuticals. Its flagship product Shelcal, estimated to gross sales of over Rs 170 crore, also crosses over to Torrent.

The transaction will also involve the transfer of employees engaged in sales, marketing and operations of the local business, but company officials were not available to provide the details.

(This article was published on December 13, 2013)
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