Acquisition of Brazilian firm will increase SeQuent’s global footprint, says MD

SeQuent Scientific shares jumped after its subsidiary Alivira Animal Health Limited announced plans to acquire 70-per cent stake in Brazilian firm Indústria e Comércio de Produtos Veterinários SA (Interchange). Speaking to Bloomberg TV India , Alivira Managing Director Manish Gupta says the new deal is important as Brazil is the third largest veterinary market in the world with about 7.5-per cent market share, next only to the US and China. Political and financial turmoil in Brazil provided SeQuent the right opportunity to cut a deal at a “reasonable” value.

In Alivira, we are trying to create a global veterinary company. Brazil is strategically very important because it is the third largest veterinary market in the world with about 7.5-per cent market share. It is incidentally next only to the US and China in the veterinary space. In the food producing animal space, which is really a focus area of Alivira, it is the largest in the bovine market, second largest in poultry and the fourth largest in the swine market. Incidentally, Brazil is the largest food animal exporting or protein exporting nation in the world. There have been obviously some challenges in Brazil in the last couple of years both politically and also financially, and that provided us the right opportunity to do a transaction at a reasonable valuation in that market.

Alivira’s acquisition is valued at only $3.6 million. Can you elaborate on this? Who owns the remaining 30 per cent of the stake?

The current shareholders will continue to own the 30 per cent of the residual stake in Interchange. The number (deal size) is in dollar terms. The local currency has been fluctuating a lot. When we convert the dollar numbers into the local currency, the valuation comes to about 25 million real, the Brazilian currency. We are investing about 13 million real for the 70 per cent stake. About 8 million real out of the 13 million will actually be fresh equity infusion into the company and the balance 5 million real will go to the current promoters.

Why are you zeroing on in this particular company? How does it fit into your overall plan? Does this help in increasing your footprints in the veterinary space in the international markets? Can you take us through the rational for this?

Yes, certainly. If you see fundamentally, veterinary market is very relationship-oriented. And, therefore, having the last leg of relationship or having footprint in the market is very important. To that extent if you see in the last 18 months, we have progressed considerably by acquiring two companies in Turkey, three in Europe and this is our foray into the Latin American market, which is strategically a very important market. Now, our rational of course is that it is a right-size asset, which has its own manufacturing capacities and capabilities locally. In Brazil, you do require ‘Made in Brazil’ tag and therefore local manufacturing is important.

And finally of course, we believe that our product portfolio in total, which we will be adding to the entity, can grow into a much larger organisation as well as improve the profitability in a short period of time.

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