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Aspen Pharmacare Holdings Limited - Acquisition By Aspen Of Fine Chemicals

Release Date: 10/03/2004 15:12
Code(s): APN
Wrap Text

Aspen Pharmacare Holdings Limited - Acquisition By Aspen Of Fine Chemicals Corporation (Pty) Ltd Aspen Pharmacare Holdings Limited (Incorporated in the Republic of South Africa) (Registration Number 1985/002935/06) (Share code APN ISIN: number ZAE 000023586) ("Aspen") ACQUISITION BY ASPEN OF FINE CHEMICALS CORPORATION (PTY) LTD 1. Introduction Investec Bank Limited is authorised to announce that Aspen has entered into an agreement, in terms of which it will acquire 100% of the shares of and shareholders loan accounts in Fine Chemicals Corporation (Pty) Ltd ("FCC"), a company incorporated in the Republic of South Africa, subject to the fulfilment of the conditions precedent referred to below. Private Equity funds managed by the Brait SA Group ("Brait"), in conjunction with management and staff ("management") own 100% of the equity in FCC . 2. Nature of business of FCC and rationale for the acquisition FCC manufactures and supplies off-patent active pharmaceutical ingredients ("APIs") to the pharmaceutical industry. FCC trades in a number of small volume, high value niche products that cover various therapeutic categories and is a market leader in a number of its products. FCC has a pipeline of new products at various stages of development that are expected to contribute materially to future growth of the business. Its customer base comprises both South African and international pharmaceutical companies. Exports currently contribute approximately 50% to total revenue. APIs are the vital raw materials needed for the pharmaceutical manufacturing industry and normally constitute the single largest cost of most medicines. Access to niche APIs at competitive prices is essential for the sustainability and growth of pharmaceutical manufacturers. FCC is already an important supplier of APIs to Aspen for the South African market. Aspen plans to integrate certain of its product development initiatives with the APIs within the FCC portfolio. Furthermore, it is a strategic objective to develop the capability for the production of the APIs used in antiretrovirals at FCC. The manufacture of APIs for antiretrovirals has been identified by government as being strategic. Together with local manufacture and BEE status, tender preferences are expected to be granted for the manufacture of the antiretroviral APIs. FCC"s export markets provide further impetus to Aspen"s stated objective of expanding offshore. The acquisition will assist Aspen to enhance its status as a quality producer of globally competitive products. The single largest export market is the USA, for which FDA approval is required. From this international quality API platform, together with Aspen"s imminent launch of it"s oral solid dose facility, also built to international standards, niche local and export opportunities will be targeted. 3. Salient terms of the acquisition Aspen will purchase 100% of the shares and loan accounts from Brait and management for a total purchase consideration, made up as follows :- - R249,163 million payable on the effective date. - A deferred amount is payable to management after the audited results for the year ended 30 June 2007 are finalised. This payment is calculated as a % of EBITDA for the June 2007 financial year. The total purchase consideration has been capped at 19,9% of Aspen"s market capitalisation (net of treasury shares) at the date of signing of this agreement. It is anticipated that the total purchase consideration will be substantially less than the cap. The purchase consideration will be funded from internal cash resources and existing facilities. 4. Conditions precedent The FCC acquisition is, inter alia, subject to the approval of all regulatory authorities which may be required including :- - Approval of a financial institution utilised by FCC relating to a change of control clause. - Competition Commission approval. 5. Effective Date The effective date of the acquisition is the first business day after fulfilment of the last of the conditions precedent. 6. Financial effects of the FCC acquisition Based on an initial payment of R249,163 million, a deferred payment of R25,837 million (calculated using the EBITDA reported by FCC for the financial year ended 31 July 2003) to be made after 30 June 2007, and the unaudited results of FCC for the 6 months ended 31 December 2003, the acquisition would not have had a significant effect on the headline earnings and net asset value per Aspen share, assuming the acquisition had been in effect for the 6 months ended 31 December 2003. The acquisition is expected to make a positive contribution to the future earnings of Aspen. As at 31 December 2003, the net asset value of FCC was R82,9 million, comprising R28,7 million of net tangible assets and R54,2 million of goodwill and other intangible assets, the major category being drug master files. Drug master files are the registered records of the intellectual property relating to the processes of manufacture of each API. Had the FCC acquisition taken place at 31 December 2003, based on the net tangible asset value of FCC reflected in the accounting records at that date, the pro-forma net tangible asset value per Aspen share would have decreased from R105,7 to R39,2 cents, a change of 63%. 7. Categorisation of the acquisition The acquisition has been categorised as a category 3 transaction in terms of section 9.5(a) of the JSE listings Requirements Durban 10 March 2004 Investec Bank Limited Merchant Bank and Sponsor to Aspen CM&A CHRIS MORTIMER & ASSOCIATES Legal advisor to Aspen Paul Botha Incorporated Legal advisor to management Brait Corporate advisor to Vendors Read Hope Phillips Atterneys Legal advisor to Brait Date: 10/03/2004 03:12:41 PM Supplied by www.sharenet.co.za Produced by the JSE SENS Department

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