Branded healthcare conglomerate Ascendis Health is entrenching its position in Europe with two chunky acquisitions in the region – as the company continues its rousing acquisition path.
On Tuesday the company announced the acquisition of Cyprus-based generic pharmaceutical manufacturer Remedica for up to €335 million (R5.8 billion) and sports nutrition company Scitec Nutrition for €170 million (R2.9 billion).
The acquisitions are in line with its stated strategy to develop a significant international footprint to diversify its earnings.
As CEO Dr Karsten Wellner tells Moneyweb: “Our fishermen have cast the net wide and now the fishes are biting.” This is in reference to company’s prowl for acquisitions which have added clout to its deal-making profile and scale to the business.
Remedica supplies over 300 generic pharmaceutical products in emerging markets including the Middle East, Asia, Africa and South America. It supplies essential medicines such as malaria treatment and antibiotics and also manufactures products from manufacturing facilities in Cyprus.
Scitec Nutrition is believed by Ascendis to rank among the leading sports nutrition brands across Europe, with a key presence in major markets like Germany, France, Spain, Italy, Hungary and Poland.
“It was a long search for both companies, which have good growth potential and profits. Our strategy is to complement growth in the domestic health and care market through international expansion and by acquiring platform businesses offshore,” says Wellner.
He adds that both acquisitions will be a game changer for Ascendis, as they offer rand hedge components to the local business. The deal also offers the company critical mass to introduce some of its wellness and sports brands like Solal, Nimue Skin Technology, Evox Advanced Nutrition, Scientific Sports Nutrition and more to international markets.
Early in 2015, Ascendis set an offshore revenue target of 30% of its total turnover in the medium to long term. At the time it signalled that getting there might require acquisitions and not only organic growth.
With its latest acquisitions, Wellner says its revenue derived from offshore markets will be more than 50%. The deals are expected to have a material financial impact, as Ascendis’ market capitalisation of R6.3 billion at the time of writing will rise to R10 billion. Upon conclusion, the deals are expected to add 90% or more than R300 million to its profit after tax (excluding finance costs).
The two transactions will be funded through a combination of new debt facilities of about €180 million (R3.1 billion), a fully underwritten rights offer of R1.2 billion and vendor placements totalling R1.2 billion.
Ascendis has also roped in the International Finance Corporation, which has committed US$30 million (R496 million) while another international investor has committed R180 million as part of the vendor placement.
The company’s shareholders, who represent 63% of the shares in issue, have formally supported the transactions, which are effective from August 1 2016.
Much of the company’s focus has been on aggressively building scale and organic growth since Cape-based private equity group Coast2Coast listed it on the JSE in 2013. Its first offshore deal was last year when it acquired a 49% stake in Spanish pharmaceutical group Farmalider SA for R210 million. Other bolt-on deals followed including the acquisition of pharmaceutical business Akacia Healthcare; and the purchase of 85 registered product dossiers from Sandoz, a generic medicines company.
Ascendis’ shares were up 11.01% to R24.80 on the day.