Torrent Pharmaceuticals Limited and global investment firm KKR on Sunday announced that Torrent has entered into definitive agreements to acquire majority stake in JB Chemicals and Pharmaceuticals (JB Pharma) from KKR at an Equity valuation of Rs 25,689 crores (on fully diluted basis), followed by a merger of the two entities that will make it India's second most valued pharma company.
Torrent will acquire 46.39% stake from promoters Tau Investment Holdings Pte Ltd (a unit of global investment firm) for about Rs 11,917 crore. It would additionally buy another 2.80 % from certain employees of JB Chemicals at the same acquisition price of Rs 1,600 per share (totaling Rs 719 crore).
Post this, it would make an open offer for buying 26 per cent from open market, as per listing norms, at a price of Rs 1,639.18 per share (totaling Rs 6,842.8 crore). The open offer price is at a discount to Friday's closing price of Rs 1,799.35 apiece for JB Chemicals on the BSE.
This will be the second biggest deal in the pharma sector ever, behind Sun Pharmaceutical Industries' 2015 acquisition of Ranbaxy Laboratories.
Moneycontrol was the first to report that Global private equity major KKR was in early discussions with Torrent Pharmaceuticals Ltd for selling its majority stake in its portfolio company JB Chemicals & Pharmaceuticals Ltd
Samir Mehta, Executive chairman, Torrent, said," We are pleased to have on board the JB Pharma heritage and build on the platform for the future. Torrent’s deep India presence and JB Pharma’s fast growing India business, combined with the CDMO and international footprint offers immense potential to scale both revenue and profitability. This strategic alignment furthers our goal of strengthening our presence in the Indian pharma market, and build a larger diversified global presence. Moreover, the CDMO platform provides a new long-term avenue of growth for Torrent.”
Gaurav Trehan, Co-Head of Asia Pacific and Head of Asia Pacific Private Equity, KKR, and CEO of KKR India, said: “JB Pharma’s transformation under our stewardship is a testament to KKR’s ability to scale high-quality companies. We are proud to have collaborated with JB Pharma’s management.
The transaction between Torrent and JB Pharma will unfold in two distinct phases. In the first phase, Torrent will acquire a 46.39% equity stake in JB Pharma on a fully diluted basis through a Share Purchase Agreement valued at Rs 11,917 crore, with shares priced at Rs 1,600 each.
"Torrent Pharmaceuticals Limited and global investment firm KKR today announced that Torrent has entered into definitive agreements to acquire controlling stake in J B Chemicals and Pharmaceuticals from KKR at an equity valuation of Rs 25,689 crores (on fully diluted basis), followed by a merger of the two entities," a company statement said.
Post share purchase, JB Pharma will merge into Torrent. Every shareholder holding 100 shares in JB Pharma shall receive 51 shares of Torrent.cStrategically, the deal gives Torrent access to JB Pharma's leading brands in the chronic segment and opens up untapped therapeutic areas like ophthalmology.
Besides creating operational synergies, the deal is expected to strengthen Torrent's market share in the Indian pharmaceutical market, and diversify its platform into contract development and manufacturing.
The acquisition will strengthen Torrent's market share in the IPM as well as give entry into the CDMO segment with long-term potential. It would also have consolidation in key international markets and give greater ability to scale up. As per the deal, Torrent will acquire 46.39 per cent stake (on a fully-diluted basis) through a share purchase agreement (SPA) and additional potential acquisition of up to 2.80 per cent, aggregating to 49.19 per cent which will trigger a mandatory open offer of 26 per cent.
These are subject to standard requisite statutory and regulatory approvals, including from Securities and Exchange Board of India (SEBI), Stock Exchanges, the Competition Commission of India (CCI), National Company Law Tribunal (NCLT), and other approvals, as applicable. "Torrent's deep India presence and JB Pharma's fast growing India business, combined with the CDMO and international footprint offers immense potential to scale both revenue and profitability.
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