Private equity firm Advent International has agreed to acquire 50.1 per cent stake in Hyderabad-based Suven Pharmaceuticals from the Jasti family, for ₹6,313 crore, inking one of the largest pharma deals in recent years.

As part of the transaction, Advent will make an open offer for an additional 26 per cent of the outstanding equity shares of the company from public shareholders, also valued at ₹495 per share, forking out an additional ₹3,276 crore, the company told exchanges.

Once the transaction is sealed with regulatory approvals and board clearances, Advent intends to explore merger of its portfolio company, Cohance Lifesciences, with Suven, to build an end-to-end contract development and manufacturing organisation (CDMO) and merchant active pharmaceutical ingredient (API) player servicing the pharmaceutical and specialty chemical markets.

Shweta Jalan, Managing Partner and Head of Advent International (India), told businessline that the CDMO sector was attractive as companies look for a China-plus-one strategy; besides Suven’s own track-record. The combined entity (Cohance and Suven) will be the third largest in the CDMO space, she said, adding that Advent was in it for the long haul.

Value creation

Explaining the deal, Suven Pharma’s Managing Director Venkateswarlu Jasti, said it aimed to create value for the promoters, shareholders and other stakeholders, besides bringing in greater management bandwidth. Reports quote him also pointing to the absence of a succession plan.

On his future role, Jasti said there would be no change for anyone at the moment as the merger process takes 5-6 months. “Once the merger happens, I will continue in an advisory role,” he said, without outlining what he intended to do with the sale proceeds. When asked if the deal was to mobilise funds for Suven Life Sciences, he said it was not necessary, as it had funds for 3-4 years.

“Our vision for Suven is to build a $1 billion global leader by executing effectively on the product pipeline, building new marquee customers, turbo-charging business development and scaling up manufacturing and research and development,” Pankaj Patwari, MD, Advent International, said in a statement.

PE deals

The latest deal is the largest on pharma’s deal street in recent times. In May 2020, The Carlyle Group had agreed to pick up 74 per cent in SeQuent Scientific, for over ₹1,500 crore. In June, the fledgeling Piramal Pharma offloaded 20 percent to The Carlyle Group for $490 million (approximately ₹3,700 crore). And in July 2020, KKR agreed to pick up about 54 per cent stake in JB Chem, one of India’s older drugmakers, for a reported consideration of about ₹3,100 crore.

In fact, Cohance Lifesciences (wholly-owned by Advent) was formed in November, to create a new brand identity for its CDMO and API platform, by bringing together three Advent portfolio companies — RA Chem Pharma, ZCL Chemicals and Avra Laboratories.

Suven Pharma’s scrip lost 5.22 per cent on the BSE on Monday to end at ₹472.20 a piece.