Alkem Laboratories Ltd Joins Race for JB Chemicals and Pharmaceuticals
New Delhi: India’s fifth-largest branded pharmaceutical company, Alkem Laboratories Ltd, has joined the race for JB Chemicals and Pharmaceuticals, according to sources familiar with the matter. This move comes as KKR and Co looks to cash out of the 48-year-old company, driven by a significant rise in its market value.
Torrent Pharmaceuticals, India’s fifth-largest drugmaker, has also pulled out of negotiations over valuation differences, coinciding with this development. Torrent had been seen as the frontrunner for the likely $3 billion buyout of Alkem Laboratories Ltd, but other suitors such as EQT have also backed away due to the company’s rising share price.
Torrent had been in active negotiations with global banks to finance a potential deal after missing out on Cipla and Biogaran, France’s largest generics company. However, earlier this week, Torrent’s management told lenders that it is pausing negotiations with KKR.
Alkem Laboratories Ltd, overseen by the third generation of the Singh family, has a market capitalisation of Rs 75,880.73 crore. JB Chemicals, with a market capitalisation of Rs 29,192.24 crore, has seen its share price rise 16% since the beginning of the year.
If successful, this acquisition will be Alkem’s largest M&A ever, potentially moving it to fourth place in the domestic formulations market. It will further strengthen Alkem’s presence in the chronic segment, which accounts for 18% of its revenue.
Under its new CEO, Vikas Gupta, Alkem has identified core areas for growth, including consolidating market share in chronic therapies, improving coverage among specialist doctors, and targeting tier II to IV cities. The company has also partnered with US medical devices company Exactech to leverage on its leadership position in the orthopaedics segment.
Analysts believe Alkem may need to partner with a PE fund to finance such a large transaction. The company has a net cash of Rs 3845 crore as of June 30, 2024, and a total debt of Rs 1418 crore as of March 31, 2024.
The acquisition will trigger an open offer for another 26% stake, leading to a change of control. KKR had acquired the stake for about Rs 3,100 crore, or Rs 745 per share, from the founding Mody family in July 2020.
JB Chemicals, with a market capitalisation of Rs 1.17 lakh crore, offers a robust domestic franchise and a niche contract manufacturing organization (CMO) play, along with exports. The company has a few star brands such as Nicardia, Metrogyl, Cilacar, and Rantac, and has also acquired Novartis’ heart failure drug brand Azmarda.
The new management plans to pursue profitable growth in India, emerging markets, and CDMO business. Biologics is another growth area identified by the management that sees growth in emerging markets and in India.
KKR’s investment arm, TAU Investment, currently owns 53.78% of JB Chemicals. The acquisition will trigger an open offer for another 26% stake, leading to a change of control.
Reference : https://health.economictimes.indiatimes.com/news/pharma/pharma-industry/alkem-joins-3-bn-race-for-jb-chem-as-torrent-pauses-talks/113306895
