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APN - Aspen Pharmacare Holdings Limited - ASPEN announces Multi-Territory
Acquisition of OTC products
ASPEN PHARMACARE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1985/0002935/06
Share code: APN
ISIN: ZAE000066692
("Aspen Holdings")
ASPEN ANNOUNCES MULTI-TERRITORY ACQUISITION OF OTC PRODUCTS
Aspen Holdings is pleased to announce that the Aspen Group ("Aspen") has reached
agreement with GlaxoSmithKline plc ("GSK") for the acquisition of a portfolio
of established over-the-counter ("OTC") products ("the products") in selected
territories including South Africa, Australia and Brazil. The deal is valued
at GBP 164 million (ZAR 2.1 billion at ZAR 12.6/GBP).
The deal comprises two transactions ("the transactions"):
* The acquisition by Aspen Holdings of the products sold in the territories
of South Africa, Namibia, Botswana, Swaziland, Lesotho, Zambia and Zimbabwe
for GBP 20 million (ZAR 252 million at ZAR 12.6/GBP) ("the Southern Africa
transaction"); and
* The acquisition by Aspen Global Incorporated, a wholly owned subsidiary of
Aspen Holdings incorporated in Mauritius, of the products sold in the rest
of the world, but excluding the territories of North America and Europe
(which are the subject of separate transactions concluded between GSK and
third parties), for GBP 144million (ZAR 1.8 billion at ZAR 12.6/GBP ("the
Rest of the World transaction").
The Southern Africa transaction is subject to, amongst others, the following
conditions precedent:
* The approval of the South African competition authorities; and
* The approval of the Financial Surveillance Department of the South African
Reserve Bank.
In addition, the Southern Africa transaction in respect of Namibia and Swaziland
only, is subject to and conditional upon the approval of the respective
competition authorities in those countries.
The effective date of the Southern Africa transaction will be the last business
day of the calendar month in which the last of the applicable conditions
precedent is fulfilled.
The Rest of the World transaction is unconditional and is effective from 1 May
2012, save in respect of:
* the product, Zantac, which is marketed, distributed and sold in Australia
and New Zealand which is subject to the approval of the Australian
competition authorities;
* the portion of the Rest of the World transaction relating to Kenya which is
subject to the approval of the Kenyan competition authorities; and
* the portion of the Rest of the World transaction relating to Tanzania which
is subject to the approval of the Tanzanian competition authorities.
(collectively, "the Rest of the World conditions").
The transaction value of the products which are subject to the Rest of the World
conditions is GBP 23.1 million (ZAR 291 million at ZAR 12.6/GBP. The elements
of the Rest of World transaction which are subject to the Rest of the World
conditions will be effective on the last business day of the month in which the
respective Rest of the World conditions are fulfilled.
In terms of the transactions, the marketing and distribution of the products
will transition from GSK to Aspen over periods of time varying by country.
Existing manufacturing arrangements for the products will be assumed by Aspen.
Funding
The transactions will be funded from existing cash resources, existing credit
facilities and new debt, the latter funding approximately 50% of the
transaction. Arrangements for the raising of the new debt have been finalised.
Financial effects
The unaudited pro-forma financial effects set out in the tables below have been
prepared to assist Aspen shareholders to assess the impact of the transactions
on the earnings per share ("EPS") and diluted EPS, headline EPS ("HEPS") and
diluted headline EPS, diluted normalised HEPS and the net asset value ("NAV")
and the tangible NAV ("NTAV") per Aspen ordinary share as at 31 December 2011
and for the interim period then ended. The pro-forma financial effects have
been prepared for illustrative purposes only and, because of their nature, they
may not fairly present Aspen`s financial position at 31 December 2011 and the
results of its operations for the six months then ended. It has been assumed
for the purposes of the pro-forma financial effects that the transactions took
place with effect from 1 July 2011 for Statement of Comprehensive Income
purposes and 31 December 2011 for Statement of Financial Position purposes. The
Directors of Aspen are responsible for the preparation of the financial effects
which have not been reviewed by the auditors.
The "After" columns represent the effects after the transactions.
The "Change %" columns compares the "After" columns to the "Before" columns.
The number and weighted average number of shares in issue have been stated net
of treasury shares.
"Before" "After" % Change
Cents Cents
EPS for the six-months ended 31 343.6 362.5 5.5%
December 2011
HEPS for the six-months ended 31 316.4 335.3 6.0%
December 2011
Diluted EPS for the six-months ended 331.2 349.3 5.5%
31 December 2011
Diluted HEPS for the six-months ended 305.2 323.3 5.9%
31 December 2011
Diluted normalised HEPS for the six 308.1 329.8 7.0%
months ended 31 December 2011
NAV as at 31 December 2011 3,559.3 3,555.6 (0.1%)
NTAV as at 31 December 2011 11.5 (465.1) (4,128.1%)
Number of shares in issue as at 31 436.5 436.5 -
December 2011 (million)
Weighted average number of shares in 435.1 435.1 -
issue for the six months ended at 31
December 2011 (million)
Weighted average number of diluted 454.5 454.5 -
shares in issue for the six months
ended at 31 December 2011 (million)
Notes:
1 Extracted from the published interim financial statements for the six
months to 31 December 2011.
2 The figures for the products were extracted from the unaudited management
accounts of GSK for the six months ended 31 December 2011.
3 An adjustment of 7.5% of revenue has been made for distribution fees.
4 An increase of 5% to the cost of sales of the products has been made to
reflect agreed supply arrangements following the transaction.
5 It is Aspen`s intention to increase recurring promotional spend on the
products relative to the actual expenditure included within the pro-forma
financial effects above. This is with a view to improving the revenue of
the products in the medium to long term.
6 A preliminary assessment has indicated that the intellectual property
relating to the products constitutes indefinite life assets and hence no
amortisation has been provided for in the pro-forma financial effects
above.
7 Non-recurring transaction costs of R24 million are included in determining
the financial effects of which R8 million has been capitalised. The
remaining R16 million is excluded in determining the impact of the
transactions on diluted normalised HEPS and represents the only adjustment
to diluted HEPS in determining diluted normalised HEPS.
8 Notional interest for the six months ended 31 December 2011 has been
provided based on the costs of financing the transaction.
The Products
The products comprise well established OTC brands of proven performance. The
main areas of therapeutic treatment of the products are analgesic, gastro-
intestinal and respiratory. Other areas covered include dermatology, infant
care, vitamins and minerals. The leading products are recognised household
brands such as Phillips Milk of Magnesia, Dequadin, Solpadeine, Cartia, Zantac
and Borstol.
GSK reports that the products which are the subject of the transactions recorded
revenue of GBP 59.3 million in calendar 2011. In accordance with Aspen`s
segmental reporting this revenue is split as follows:
* Asia Pacific: GBP 21.4 million;
* South Africa: GBP 7.3 million;
* Sub-Saharan Africa: GBP 5.0 million; and
* International: GBP 25.6 million (of which GBP 17.0 million is in Latin
America).
Rationale
The products acquired through these transactions are an excellent geographic fit
with Aspen`s existing footprint and will allow for significant strengthening of
Aspen`s OTC offering in all of the territories concerned. The products have
considerable established brand equity which Aspen intends to leverage through
increased promotion and plans to expand through line extensions. The
transactions will also provide impetus in territories where Aspen is seeking to
grow critical mass such as Latin America and South East Asia.
Aspen expects the transactions to be earnings accretive from the outset.
Small Related Party Transaction
GSK is an 18.7% shareholder in Aspen Holdings and is a related party to Aspen
Holdings in terms of the JSE listings requirements. BDO Corporate Finance (Pty)
Ltd, as the independent professional expert, has confirmed that the respective
values of the transactions are fair to the shareholders of Aspen Holdings and
their fairness opinion is available for inspection at Aspen Holdings` registered
office for a period of 28 days from the date of this announcement.
Durban
20 April 2012
Sponsor:
Investec Bank Limited
Sole Underwriter and Mandated Lead Arranger:
The Standard Bank of South Africa Limited
Date: 20/04/2012 13:30:01 Supplied by www.sharenet.co.za
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