After JB Chemicals and Biocon in the recent past, it is Bangalore-based Strides Arcolab's turn to sell an overseas operation. And the valuations reveal, there is no slow-down in healthcare mergers and acquisition (M&A), say investment bankers involved with the Strides-Watson deal.

“The deal with Strides was different, because when its promoters embarked on the process of appointing and discussing with the investment banker — they were clear they wanted to focus on their core injectables business,” Mr Tommy Erdei, Managing Director, Jefferies (global healthcare) told Business Line.

The investment banking firm Jefferies advised Strides on the sale of its subsidiary Ascent Pharmahealth to Watson Pharma. The offer from Watson values Ascent (with operations in Australia and South East Asia) at an enterprise value of AU$ 375 million (over Rs 1,900 crore).

By looking to sell the less core business, Strides was also looking to demonstrate to the stock markets and investors the underlying value in the company that promoters felt was not being recognised, he said.

Valuations

There is no slowdown in M&As in the healthcare sector, Mr Erdei said, with the investment banking group seeing about 75 global healthcare transactions since 2010, he said.

The recent additional layer of scrutiny that the Indian government has introduced through the Foreign Investment Promotion Board and the Competition Commission of India (for acquisitions of existing pharma operations in India by foreign companies) — will not cause a slow-down in such transactions, he observed.

The Indian market is both strategic and important, and will not see a slow down because of the added layer of complexity, he said.

Further pointing out the difference with the Strides deal, he said, historically Indian promoters largely transact deals on a personal, one-to-one equation. In this case, there was a structured process and that shows the increasing maturity of the market, he added.

Having interacted with companies like Ranbaxy (now acquired by Daiichi Sankyo) and Matrix (now with Mylan) — Mr Erdei said, in this case, Strides promoters went through the process focussed on creating value for the shareholders. There continues to be excitement around its injectables business that remains with the company, he added.

> jyothi@thehindu.co.im

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