| Wed 10 Mar 2004, 16:11 | | Acquisition By Aspen Of Fine Chemicals |
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Aspen Pharmacare Holdings Limited - Acquisition By Aspen Of Fine Chemicals
Corporation (Pty) Ltd
Aspen Pharmacare Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration Number 1985/002935/06)
(Share code APN ISIN: number ZAE 000023586)
("Aspen")
ACQUISITION BY ASPEN OF FINE CHEMICALS CORPORATION (PTY) LTD
1. Introduction
Investec Bank Limited is authorised to announce that Aspen has entered into
an agreement, in terms of which it will acquire 100% of the shares of and
shareholders loan accounts in Fine Chemicals Corporation (Pty) Ltd ("FCC"), a
company incorporated in the Republic of South Africa, subject to the fulfilment
of the conditions precedent referred to below.
Private Equity funds managed by the Brait SA Group ("Brait"), in
conjunction with management and staff ("management") own 100% of the equity in
FCC .
2. Nature of business of FCC and rationale for the acquisition
FCC manufactures and supplies off-patent active pharmaceutical ingredients
("APIs") to the pharmaceutical industry. FCC trades in a number of small
volume, high value niche products that cover various therapeutic categories and
is a market leader in a number of its products.
FCC has a pipeline of new products at various stages of development that
are expected to contribute materially to future growth of the business. Its
customer base comprises both South African and international pharmaceutical
companies. Exports currently contribute approximately 50% to total revenue.
APIs are the vital raw materials needed for the pharmaceutical manufacturing
industry and normally constitute the single largest cost of most medicines.
Access to niche APIs at competitive prices is essential for the sustainability
and growth of pharmaceutical manufacturers.
FCC is already an important supplier of APIs to Aspen for the South African
market. Aspen plans to integrate certain of its product development initiatives
with the APIs within the FCC portfolio. Furthermore, it is a strategic
objective to develop the capability for the production of the APIs used in
antiretrovirals at FCC. The manufacture of APIs for antiretrovirals has been
identified by government as being strategic. Together with local manufacture
and BEE status, tender preferences are expected to be granted for the
manufacture of the antiretroviral APIs.
FCC"s export markets provide further impetus to Aspen"s stated objective of
expanding offshore. The acquisition will assist Aspen to enhance its status as
a quality producer of globally competitive products. The single largest export
market is the USA, for which FDA approval is required.
From this international quality API platform, together with Aspen"s imminent
launch of it"s oral solid dose facility, also built to international standards,
niche local and export opportunities will be targeted.
3. Salient terms of the acquisition
Aspen will purchase 100% of the shares and loan accounts from Brait and
management for a total purchase consideration, made up as follows :-
- R249,163 million payable on the effective date.
- A deferred amount is payable to management after the audited results
for the year ended 30 June 2007 are finalised. This payment is calculated as a
% of EBITDA for the June 2007 financial year.
The total purchase consideration has been capped at 19,9% of Aspen"s market
capitalisation (net of treasury shares) at the date of signing of this
agreement. It is anticipated that the total purchase consideration will be
substantially less than the cap.
The purchase consideration will be funded from internal cash resources and
existing facilities.
4. Conditions precedent
The FCC acquisition is, inter alia, subject to the approval of all regulatory
authorities which may be required including :-
- Approval of a financial institution utilised by FCC relating to a
change of control clause.
- Competition Commission approval.
5. Effective Date
The effective date of the acquisition is the first business day after fulfilment
of the last of the conditions precedent.
6. Financial effects of the FCC acquisition
Based on an initial payment of R249,163 million, a deferred payment of R25,837
million (calculated using the EBITDA reported by FCC for the financial year
ended 31 July 2003) to be made after 30 June 2007, and the unaudited results of
FCC for the 6 months ended 31 December 2003, the acquisition would not have had
a significant effect on the headline earnings and net asset value per Aspen
share, assuming the acquisition had been in effect for the 6 months ended 31
December 2003. The acquisition is expected to make a positive contribution to
the future earnings of Aspen.
As at 31 December 2003, the net asset value of FCC was R82,9 million, comprising
R28,7 million of net tangible assets and R54,2 million of goodwill and other
intangible assets, the major category being drug master files. Drug master
files are the registered records of the intellectual property relating to the
processes of manufacture of each API.
Had the FCC acquisition taken place at 31 December 2003, based on the net
tangible asset value of FCC reflected in the accounting records at that date,
the pro-forma net tangible asset value per Aspen share would have decreased from
R105,7 to R39,2 cents, a change of 63%.
7. Categorisation of the acquisition
The acquisition has been categorised as a category 3 transaction in terms
of section 9.5(a) of the JSE listings Requirements
Durban
10 March 2004
Investec Bank Limited
Merchant Bank and Sponsor to Aspen
CM&A
CHRIS MORTIMER & ASSOCIATES
Legal advisor to Aspen
Paul Botha Incorporated
Legal advisor to management
Brait
Corporate advisor to Vendors
Read Hope Phillips Atterneys
Legal advisor to Brait
Date: 10/03/2004 03:12:41 PM Produced by the JSE SENS Department
