Aspen Pharmacare said the sale of its infant-formula business has been approved by a New Zealand regulator, allowing Africa’s biggest drugmaker to finally draw a line under the long-delayed disposal.
Lactalis International of France agreed to buy the division in September for 740 million euros ($827 million), a disappointment to Aspen investors who were expecting a better price. Their mood only darkened when the deal became caught up in regulatory scrutiny, causing delays to the closing date.
The decision by New Zealand’s Overseas Investment Office means all conditions to the sale have now been met, Aspen said in a statement on Friday. The business, known as Nutritionals, makes and sells infant-formula around the world, including in China, Latin America and Australasia.
Aspen shares jumped as much as 8.5% on news of the approval, the most since March 12. The stock is still down almost 60% since the deal was announced, valuing the Durban, South Africa-based drugmaker at R50 billion ($3.5 billion).
“This is hugely positive and in a sense returns credibility to management,” Ron Klipin, a portfolio manager at Johannesburg-based Cratos Wealth, said by phone. “We would want them to bring down the gearing and show additional financial discipline.”
Aspen’s financing costs increased as delays to the deal hampered plans to to pay down net debt, which rose to R53.5 billion at the end of December. Deleveraging the balance sheet is an “immediate priority,” Chief Executive Officer Stephen Saad said in March as the shares went into freefall.
Concluding the infant-formula sale will enable Aspen to focus on its main pharmaceutical operations. The company sells products such as hormones, anaesthetics and antiretroviral medicines in more than 150 countries.
The shares traded 7% higher at R111.52 as of 10:42 am in Johannesburg.