Fresenius buys Dabur's Indian oncology business

Fresenius is to acquire India's Dabur Pharma for $219 million giving it access to a portfolio of cancer treatment drugs and a supply of raw materials.
IndiaÆs Dabur Group has sold its 73.3% controlling interest in Dabur Pharma to Fresenius Kabi for Ç139 million ($219 million).

Dabur Pharma is the residual pharmaceuticals business of Dabur Group. The largest business of the group, which is owned by the Delhi-based Burman family, is Dabur India. Dabur India has been operating since 1884 and is today a $250 million company focused on healthcare, personal care and food products. Its brands are especially well respected in the ayurvedic category, the Indian system of medicine based on natural and holistic healing. Analysts comment that the move by the Burmans to sell Dabur Pharma is intended to free resources to enhance focus on Dabur India.

Dabur Pharma was a division of Dabur India which was spun out in 2003. It is an oncology-focussed player (following the sale of its non-oncology businesses to an Indian pharmaceuticals group in January 2007) and makes both generic drugs and active pharmaceutical ingredients (API) to treat cancer. Dabur PharmaÆs product portfolio is registered for sale in 40 countries in Asia, North America and Europe. The company has production facilities in India and the United Kingdom and a research and development centre near Delhi.

The deal has been struck at a price of Rs76.50 ($1.92) for every Dabur Pharma share. Fresenius will also make a mandatory public offer to minority shareholders of Dabur Pharma to acquire up to 20% of the outstanding shares at the same price to comply with SEBI guidelines. This suggests FreseniusÆ has valued the target at an equity value of Ç189.6 million.

News that Dabur Pharma was contemplating a transaction had filtered into the market in early April and the shares have been trading at around Rs60 since then. It traded up to Rs74.75 on Monday, up from its close of Rs69.15 on the Bombay Stock Exchange on Thursday (Indian markets were closed for a public holiday on Friday) before the deal was announced on Saturday.

For the financial year ended March 31, 2007, Dabur Pharma had sales of Rs3.2 billion on which it earned a profit of Rs250 million. The deal has been struck at an equity value to trailing sales multiple of 3.7 times.

In its most recent BSE filing for the quarter ended March 31, 2008, Dabur Pharma has detailed its shareholding pattern. Of Dabur PharmaÆs 26.6% shares outstanding, 20.2% are held by institutions. The International Finance Corporation with a 7.75% ownership interest, Reliance Capital (3.19%) and the Life Insurance Corporation of India (1.67%) are among the large investors in the company.

Fresenius has an agreement with an investor who will tender its 2.4% holding in Dabur Pharma in the open offer, but details of the investor were not disclosed. If Fresenius mops up 20% of the public shareholding of Dabur Pharma, it may have to sell down some shares to meet minimum levels of free float stipulated by the BSE and maintain Dabur Pharma's listing.

"The global pharma market is very attractive from an India perspective given the strong R&D skills available in this country,ö says Dr Anand Burman, founder and director of Dabur Pharma, in a written statement commenting on the deal. ôThere is a huge opportunity across the entire pharmaceutical value chain from drug discovery and development, clinical trials, manufacturing to specialty diagnostics."

Fresenius Kabi is a 100% subsidiary of global healthcare group Fresenius SE. Fresenius SE provides products and services for dialysis, hospital and outpatient medical care and had revenues of Ç11.4 billion in calendar 2007. For the same period, Fresenius Kabi had revenues of Ç2.03 billion and an operating profit of Ç332 million. The acquisition expands Fresenius' drug portfolio and gives it a secure source of supply of high-quality APIs. Fresenius will finance the acquisition through new debt and said it has already arranged the necessary funding.

The deal is subject to regulatory approvals.
¬ Haymarket Media Limited. All rights reserved.
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