Chemicals-to-building-materials diversified conglomerate Nirma has entered into a definitive pact to acquire a 75 percent stake in listed API (active pharmaceutical ingredient) player Glenmark Life Sciences at a price of Rs 615/share for Rs 5,651 crore.
The deal has been struck at enterprise value of around Rs 7,500 crore and Nirma will make a mandatory open offer to all public shareholders of the target as per Sebi regulations. Glenmark Pharma, the parent of Glenmark Life Sciences, will own 7.84 percent in Glenmark Life Sciences after the divestment.
On May 23, 2023, Moneycontrol was the first to name Nirma as a suitor in the sale process of Glenmark Life Sciences, which was initiated to reduce the debt burden of Glenmark Pharma.
The Glenmark strategy: Strategics vs PE firms
Commenting on the divestment, as part of an official statement, Glenn Saldanha, Chairman and Managing Director, Glenmark Pharma said, "We are pleased to announce this strategic transaction with Nirma, which marks a significant milestone in shaping an independent growth trajectory for Glenmark Life Sciences. This deal aligns with Glenmark’s strategic intent of moving up the value chain to become an innovative/brand led organization, with continuous focus on our core therapeutic areas of dermatology, respiratory and oncology. It also presents an opportunity for us to strengthen shareholder value through deleveraging and enhancing our overall return profile.”
Later during an interaction with the press when asked about the deal with a non-traditional pharma player like Nirma amid interest shown by private equity suitors, Saldanha said: " This is a big play into pharma for the Nirma group. They have been super successful in multiple businesses, and I am pretty sure they will use this platform to expand further. Strategic investors are more long term, growth oriented and they are much more employee friendly as compared to PE firms. So having a strategic investor look at this business made sense for us."
He added that as soon as the transaction (which was done at an EV/EBIDTA multiple of around 11 times) closes, Glenmark Pharma will be net cash positive.
The big Nirma pivot
With this acquisition, the Ahmedabad-headquartered Nirma group founded by Dr Karsanbhai Patel has forayed into the API segment and expands its existing presence in pharma consisting of injectables, parentals and ophthalmic products. The conglomerate, which has an annual turnover exceeding $2.5 billion and is present in industrial chemicals, detergents, soaps, cement and real estate development has been exploring inorganic bets in the pharma sector in recent times.
In April, it acquired a 100 percent stake in Stericon Pharma Private Limited, a Bangalore-based contract development manufacturing organization (CDMO) that makes sterile contact lens cleaning solutions and eye drops.
Stericon Pharma is complementary to Nirma's existing healthcare vertical Aculife Healthcare. According to its website, Aculife has expanded into infusions, injectables, medical devices and oral formulations and exports to over 70 countries.
Speaking on the big buyout, Hiren Patel, Managing Director, Nirma said: " Nirma has been actively involved in the pharmaceutical sector since 2006. We are excited about this transaction and firmly believe that it presents an ideal platform to propel our pharmaceutical business into its next phase of growth. Our longstanding mission has always revolved around providing high-quality healthcare product's at affordable prices. Our recent investments serve as a testament to our unwavering dedication to the pharmaceutical industry."
Patel added, "The acquisition of Glenmark Life Sciences aligns us with our company's strategic goals and positions Nirma as one of the top five independent API companies in India. This strategic move also enables us to capitalize on indigenous research and development, making a substantial contribution to the "Make in India" initiative launched by the government of India. "
The advisory team for Nirma group comprised of Khaitan & Co, DAM Capital, KPMG, BCG and Eaishman.
Kotak Investment Banking acted as the exclusive financial advisor to Glenmark Pharma and Glenmark Life Sciences while S&R Associates acted as the legal advisor to Glenmark Pharma and Trilegal acted as legal advisor to Glenmark Life Sciences.
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