Wockhardt in Irish pharmaceutical deal

India's Wockhardt closes its fourth European acquisition paying $150 million for Pinewood Laboratories of Ireland.
Wockhardt has acquired IrelandÆs Pinewood Laboratories for $150 million in an all-cash deal. Pinewood is a branded, generic pharmaceutical company, which registered a turnover of $70 million for the financial year ending June 2006. With this acquisition, Wockhardt's total sales derived from Europe will increase to more than $200 million, representing almost half the Indian companyÆs turnover.

The acquisition also expands Wockhardt's European footprint to encompass Ireland. Wockhardt acquired Wallis Laboratories in 1998 and CP Pharmaceuticals in 2002, both in the UK. In 2004 it acquired Esparma of Germany. Through its three earlier acquisitions, Wockhardt had already created a meaningful European presence and has been successful in extracting value out of the acquisitions by moving some manufacturing to the firmÆs more cost effective base in India.

Commenting on the transaction, Wockhardt chairman Habil Khorakiwal says: "The acquisition offers us enormous opportunities to unlock the value of our enlarged customer base in the UK and Ireland by offering them a wider range of products."

A number of international pharmaceutical players including IsraelÆs Teva, were in bidding for Pinewood which is the only privately owned, generic pharmaceutical company in Ireland. The price agreed represents a turnover multiple of 2.1 times 2006 turnover (year-end June) and a multiple of 21.2 times 2005 profit before tax (year-end June).

Pinewood is a 30-year-old company with over 200 prescription and over-the-counter products. It is the market leader in renal therapy products and has a strong brand name in many of its market segments. The company has a portfolio of products at various stages of development. Its manufacturing facility in Tipperary is considered state-of-the-art and the company has been growing at a compound annual growth rate of 20% for the last five years. It employs more then 350 people and is still run by founder, Michael Costello, who is its controlling shareholder and managing director.

Wockhardt is a research and development-driven Indian pharmaceuticals company and was an early mover among domestic players to develop a range of biotechnology products. It has a focus on both generic products and value added segments. In calendar 2005, Wockhardt earned revenues of $324 million of which revenues from Europe were about 41%.

India's pharmaceutical sector has witnessed a spate of outbound acquisitions over the last few months. In March, Dr Reddy's Laboratories announced the largest transaction the Indian pharmaceuticals industry has witnessed to date, buying Betapharm of Germany for $570 million. In the course of 2006, Ranbaxy acquired Belgian firm, Ethimed, as well as Terapia of Romania, and the unbranded generic business of Glaxo SmithKline in Italy and the Mundogen generic business of Glaxo SmithKline in Spain.

WockhardtÆs stock gained 1.1% yesterday to close at Rs405.95 ($8.83). Wockhardt had no advisor on the transaction. Pinewood was represented by Goodbody Corporate Finance.
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