LONDON (Reuters) – Private equity group Cinven is buying family-owned niche pharmaceuticals business Amdipharm for 367 million pounds ($590 million), it said on Monday, as part of a plan to create a much larger producer of generic drugs.
The company will initially operate as a stand-alone business but eventually will be merged with Mercury Pharma, which Cinven acquired from rival private equity house HgCapital in August, to create a business worth at least 830 million pounds.
Amdipharm was created in 2002, with a shift of focus by big drug companies away from smaller and older products giving it an opportunity to snap up “legacy products” – typically off-patent generic drugs in niche disease areas.
After a string of acquisitions Amdipharm now sells more than 50 products in over 80 countries with products including antibiotics as well as drugs for nausea, skin disease and thyroid problems.
The Cinven deal values Amdipharm at about nine times its annual earnings becore interest, tax, depreciation and amortisation (EBITDA), on a par with the earlier Mercury deal, a person familiar with the situation said.
Together with Mercury, the two businesses will generate annual revenues in excess of 200 million pounds, with Amdipharm’s sales to more than 80 countries complementing Mercury’s predominantly UK-focused customer base.
Cinven has operated a successful strategy of bolting companies together to make larger and more valuable groups, such as Dutch cable group Ziggo which it and partner Warburg Pincus floated earlier this year.
It’s the fourth deal from Cinven’s fifth buyouts fund, for which the European group has gathered some 4 billion euros for deals, a person close of the firm said, giving significant firepower for any other acquisitions in the pharma sector.
Amdipharm’s founders Vijay and Bhikhu Patel will retain a significant minority stake in the combined business, Cinven said.
“Our acquisition of Amdipharm is completely transformational. It not only doubles the size of the combined group in terms of revenue and profitability but, importantly, creates a truly global business,” said Supraj Rajagopalan, a partner at Cinven.
The deal underscores the appeal of steady cash-flows from healthcare for private equity, reflecting the defensive nature of the drugs business.
Cinven owns private hospitals business Spire and diagnostics group Sebia and last year sold allergy testing business Phadia to Thermofisher for about 2.5 billion euros.
(Editing by Kylie MacLellan and Greg Mahlich)