Private equity firm Advent International has acquired the entire stake in Mumbai-headquartered ZCL Chemicals Ltd (formerly known as Zandu Chemicals Ltd) for about ₹2,000 crore, a move that also marks the exit of Morgan Stanley Private Equity Asia from the firm.
Morgan Stanley Private Equity holds a 19 per cent stake, while the remaining 81 per cent stake is held by Parikh family (promoters of erstwhile Zandu Pharmaceutical Works Ltd) .
According to the contours of the deal signed today, Advent International will immediately acquire a 74 per cent stake in the company, including that of Morgan Stanley PE, and the remaining 26 per cent post regulatory approvals. The deal requires foreign direct dnvestment and Department of Pharmaceuticals approvals, which would take another four-six months.
“Morgan Stanley has stayed invested for about four years and wanted to exit. So we launched a process to give them an exit, which got a tremendous response from the investor community, especially the buyout funds. Many of the investors wanted to acquire a majority stake, and I don’t think the Active Pharmaceutical Ingredient (API) industry had got so much interest ever,” ZCL Chemicals’ promoter and largest shareholder Nihar Parikh told BusinessLine .
“We thought this would be an appropriate time to consider an exit,” he added.
Morgan Stanley PE had picked up the 19 per cent stake in ZCL Chemicals for about ₹150 crore in 2016, valuing the firm at ₹750 crore. The PE firm’s exit comes with a multiple of 2.6.
The deal includes the company’s facility in Ankleshwar, Gujarat, offices in Mumbai and 450 employees. The company is into manufacturing of APIs and Advanced Intermediates, and rakes in 62 per cent of business from Europe, followed by 25 per cent from North America, 7 per cent from Rest of the World and six per cent from India.
In 2008, ZCL Chemicals, previously a subsidiary of Zandu Pharmaceutical, was also part of an intense takeover battle between co-founders Parikhs and Kolkata-based Emami Group. While the Parikhs wanted to prevent the takeover, as another co-founder group had already sold their stake to Emami, the family ended up selling 40 per cent stake to Emami for about ₹400 crore.