Glenmark Pharmaceuticals has agreed to divest 75 per cent stake in Glenmark Life Sciences (GLS) to Nirma Limited for a consideration of ₹5,651 crore (at ₹615 per share).

The transaction will help strengthen Glenmark Pharma’s balance sheet, as it extinguishes the debt, said Glenn Saldanha, Chairman and Managing Director of Glenmark Pharmaceuticals. The gross debt is about ₹4,500 crore.

“This is as good a time as any,” Saldanha told businessline, on the timing of the deal that comes barely two years after GLS was listed. Glenmark Pharma and GLS had divergent pathways, he explained, as Glenmark Pharma looks to move up the value chain into speciality and innovative products, with a continuous focus on core therapeutic areas of dermatology, respiratory and oncology. GLS was focused on manufacturing and marketing API (active pharmaceutical ingredients) products across major global markets.

While Nirma is not a traditional pharmaceutical company, he said, they had a small injectible business and were investing in pharmaceuticals, though the GLS acquisition would be a major one. Nirma will make a mandatory open offer to public shareholders of GLS for 17.15 per cent at ₹631 per share, he said.

Also read: Glenmark Pharma looking to divest 8 per cent in Glenmark Life Sciences

Glenmark Pharma will retain 7.84 per cent in GLS after the divestment. The transaction helps both companies achieve their long-term goals, he said. “It also presents an opportunity for us to strengthen shareholder value through deleveraging and enhancing our overall return profile.” Glenmark Pharma will be net cash positive after the completion of the transaction.

Yasir Rawjee, Managing Director and CEO, Glenmark Life Sciences, said, “We will continue to operate as an independent API company under the new ownership of Nirma Limited.” Glenmark Pharma does not anticipate a change in GLS management post the deal.

Presently, Glenmark Pharma procures about 15 per cent of its API from GLS. It continues to have a five-year procurement agreement from GLS, the management said. As part of the transaction, Glenmark Life Sciences and Nirma have agreed to certain non-compete and non-solicit arrangements for a specified period.

GLS reported a revenue of ₹2,161 crore and a net profit of ₹467 crore in FY23. The transaction is subject to customary closing conditions precedent, including receipt of regulatory and shareholder approvals.  Kotak Investment Banking acted as the exclusive financial advisor to Glenmark Pharma and GLS on this transaction. S&R Associates acted as legal advisors to Glenmark Pharma and Trilegal acted as legal advisor to GLS, a note on the transaction said.