In the September 2006
issue:
Mylan Buys Matrix For $736 million: Buys Indian Firm To Enter Asian and
European Markets
Mylan Laboratories is expanding into Asian and European pharmaceutical
markets with its $736 million purchase of a 71.5% interest in India’s Matrix
Laboratories. This deal vertically integrates Mylan’s finished dosage
operations with Matrix’s API business, and lowers Mylan’s cost structure.
...
The Month In Deals
August posted 68 mergers and acquisitions in the health care industry. Based
on revealed prices, a total of $4.0 billion was spent to fund them. Deals in
the health care technology segment captured the greatest dollar volume for
the month.
...
In The Departments
Services
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Health Care Services
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Deal Summaries
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Additional Transactions
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Transaction Updates
Technology
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Health Care Technology
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Deal Summaries
Additional Transactions
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Transaction Updates
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Articles Archive
Companies Mentioned in this issue:
September 2006
A
A Carlsson Research AB p11
A.D.A.M., Inc. p12
ABN Amro p11
AccentCare p3
Access Therapeutics Infusion p3
Advent Partners p11
Airox, SA p12
Akrikhin p16
Alan James Group p9
Alticor, Inc. p9
American Capital Strategies p16
AmerisourceBergen p9
Amerita Healthcare p3
Anaheim Memorial Medical Center p3
Arsenal Capital Partners p16
Assurant p7
Astellas p11
Avidex, Ltd. p11
B
BD p12
Becton, Dickinson & Co. p12
Bingham McCutchen p7
Bio-Reference Laboratories p4
Blackstone Medical p12
Blum Capital p10
Braff Group p2
Broadspire Services p7
C
Canyon Creek Development p4
CapitalSource p12
CB Richard Ellis p4
Cedar Court Rehabilitation Hospital p8
Chartwell Seniors Housing REIT p4
Chiron Corp. p12
Citigroup p12
Citigroup Global Markets, Inc. p16
Close Brothers Private Equity p16
Community Health Systems p3
Concord Biotech Ltd. p10
Corus Pharma p12
Cowen and Company p12
Crawford & Co. p7
D
Deutsche Bank p9
Docpharma NV p10
DSP Merrill Lynch p11
E
Emdeon Corp. p12
Emdeon Practice Services p12
Epworth Foundation p8
Epworth Hospital p8
Explora Laboratories S.A. p10
F
Ferrer Freeman & Co. p3
Follas Laboratories p4
Forum Health p3
G
GeneDx p4
Genstar Capital, LLC p4
Gilead Sciences p12
Good Samaritan Community Healthcare p3
Gropep, Ltd. p11
Guilford Pharmaceuticals p16
H
Health Management Associates p2
HealthSouth p8
Holland Health Service p8
Huntington Beach Hospital p3
I
ING Management Limited p8
ING Real Estate Australia p4
Interleukin Genetics p9
Inverness Medical Innovations p16
J
JP Morgan Partners p12
K
Kemper Insurance Companies p7
Kindred Healthcare p9
Kindred Pharmacy Services p9
King & Spalding p7
King Pharmaceuticals p10
KRG Capital Partners p2
L
La Palma Intercommunity Hospital p3
Lake Worth Gardens p4
Lane, Berry & Co. p12
Legacy at Anderson p4
Lehman Brothers p9
LeisureCare Retirement Communities p4
Lincare p3
M
Madison Glen Properties p4
Marcus & Millichap p7
Martin Luther King Hospital p3
Matrix Laboratories, Ltd. p1
Mchem Group p10
Medicure p16
MediGene AG p11
Memorial Health Services p3
Merck & Co. p16
MGI Pharmaceuticals p16
MultiCare Health System p3
MultiPlan p7
Mylan Laboratories p1
N
NBTY, Inc. p9
NeuroSearch A/S p11
NewBridge Capital p10
Northside Medical Center p3
Novartis p12
Novozymes A/S p11
O
Occulogix p12
Odyssey p2
Omnicare p8
OnCURE Medical p4
Online Benefits p12
OribiMed Advisors, LLC p12
Orion Residential p4
Orthofix International p12
P
Pathologists Associated p4
Pediatric Services of America p3
PharMerica Long-Term Care p9
Platinum Equity p7
Preferred Hospice of Oklahoma p2
Prime Healthcare Services p3
Private Health Care Systems p7
Procter & Gamble Co. p16
Psychiatric Solutions p2
Q
Quester p11
R
Radiation Therapy Services p4
Ranbaxy Laboratories p16
Ranier Home Health Care Pharmacy p8
ResCare p2
Rosemont Pharmaceuticals, Ltd. p16
S
Sage Group plc p12
Sandy Pines p2
Savient Pharmaceuticals p16
Scientific Protein Laboratories p16
SOLX p12
Spandana Foundation p10
Standard Management Corp. p8
Starwood Capital Group p4
StoneRidge Advisors p7
Strides Arcolabs Ltd. p10
Sun Healthcare Group p2
SunPlus Home Health Services p3
Sunrise Senior Living p2
SunTrust Robinson Humphrey p7
Syngenta AG p11
T
Temasek Pte. Limited p10
Templeton Development Group p4
Tenet Healthcare Corp. p4
Teva p10
Texas Pacific Group p10
TLC Supported Living Services p2
TLC Supported Living Services of Kentucky p2
Trinity Hospice p2
TriPath Imaging p12
Trumbull Memorial p3
Tyco International p12
U
UBS Limited p11
University Behavioral Center p2
USC University Hospital p4
V
Vanguard Health Systems p3
Ventana Medical Systems p12
Vision Systems Ltd. p12
VistaCare p2
W
Wachovia Bank p12
West Anaheim Medical Center p3
Wyeth p16
Z
Zila, Inc. p9
Zila Nutraceuticals p9 |
Mylan Buys Matrix For $736 million: Buys
Indian Firm To Enter Asian and European Markets
Email Editor
Over the past year, we
have covered deals in which Indian pharmaceutical companies stretched
their wings and made acquisitions in Europe and the United States. With
the dismantling of the "Permit Raj"—a hornet’s nest of bureaucracy and
regulation—and the freer crossborder flow of capital, Indian entrepreneurs
felt emboldened to enter the global marketplace. As we all know,
investment can be a two-way street, and this month’s largest deal
illustrates how India is becoming a destination for investors and their
money.
At the end of August,
Mylan Laboratories (NYSE: MYL) announced that it is paying $736
million to acquire up to a 71.5% interest in Matrix Laboratories, Ltd.
(Mumbai: 524794), a manufacturer of active pharmaceutical ingredients,
or APIs, and solid oral dosage forms. India, with its lower manufacturing
costs, is not the sole rationale behind this deal. Matrix has a presence
in Europe as well as Asia and Africa; its Docpharma subsidiary has a
strong distribution network in southern Europe and would give MYL a strong
foothold in the European Union.
Based in Canonsburg,
Pennsylvania, Mylan Laboratories manufactures generic and brand
pharmaceutical products. On a trailing 12-month basis, Mylan generated
revenue of $1.3 billion, EBITDA of $427 million and net income of $217
million. Spurred by the growth of generic competitors such as Teva
(NASDAQ: TEVA), MYL has been scrambling to grow through acquisition. In
July 2004 it targeted King Pharmaceuticals (NYSE: KG) in a deal
valued at $4.0 billion, or 2.9x revenue; however, inability to come to
revised terms ultimately scuttled the deal in February 2005. Since then,
the competitive pressures in the pharma industry have not lessened,
prompting MYL to maintain its search for a merger partner.
Headquartered in Secunderbad
in the Indian state of Andhra Pradesh, Matrix manufactures APIs and solid
oral dosage forms at a variety of plants in India and abroad. Among its
products are antibacterials, antihistamines, antiviral drugs,
cardiovascular drugs and proton pump inhibitors. For the year ended March
31, 2006, Matrix generated revenue of $261.6 million, EBIT of $59.8
million and net income of $45.0 million. The company ranks seventh by
market value among India’s top pharma companies. Importantly, it is the
world’s second-largest API player with respect to the number of drug
master files, with over 165 APIs in the market or under development.
Matrix has grown internally
and through acquisition. In October 2005 it paid roughly €158 million for
the Belgium firm Docpharma NV, which has strong marketing and
distribution networks in the Benelux countries and in southern Europe.
With the acquisition of Docpharma, about half of Matrix’s revenues are now
generated in Europe. It also has a 43% stake in the Swiss firm Explora
Laboratories S.A., an R&D firm focused on APIs and corticosteroids.
In December 2005 it acquired a controlling interest in Concord Biotech
Ltd., an Indian firm with much the same business focus as Explora’s.
Matrix currently has in
place a deal to acquire a controlling interest in the Chinese company
Mchem Group so it can enter the API market in that country. The
company had considered a merger with Strides Arcolabs Ltd. in 2005,
another Indian pharma firm, but called it off because no agreement could
be reached on valuation.
Mylan is
offering to pay Rs. 306 per share for 51.5% of Matrix. Selling
shareholders include Singapore’s state investment firm Temasek Pte.
Limited, NewBridge Capital, Spandana Foundation, and
Matrix chairman Sri N. Prasad, who will retain a 5% interest in Matrix. (NewBridge,
we should note, is a joint venture between Texas Pacific Group and
Blum Capital.) Mylan will then make an "open offer" to Matrix’s
remaining shareholders to acquire up to an additional 20% of Matrix’s
shares outstanding. The total purchase price is expected to be
approximately $736 million. Under terms of the deal, Matrix is to remain a
publicly traded company in India and will continue to operate on an
independent basis.
This price
offers shareholders a 10% premium to the stock’s prior-day price and a 15%
premium to the 30-day average stock price. The price to revenue multiple
is 2.8x and the price-to-EBIT multiple is 12.3x. The purchase price
contemplated in the deal as currently structured implies a value of $1.029
billion for a 100% stake in the firm, with a price to revenue multiple of
3.9x and a price-to-EBIT multiple of 17.2x.
This deal is
to be financed using MYL’s existing credit facility and cash on hand. Some
of the funds received by NewBridge, Temasek and N. Prasad will be used to
purchase newly issued shares of MYL common stock. NewBridge will invest
about $93 million, Temasek $46 million and N. Prasad $25 million.
The
geographic diversification to be garnered in this deal lowers Mylan’s risk
to heightened price competition in the U.S. generic market. The combined
company will offer broader therapeutic categories for customers. The
vertical integration the deal implies will enhance the company’s supply
chain capabilities, as well. For example, Matrix is currently the world’s
largest supplier of generic anti-retroviral APIs; through this franchise,
Mylan and Matrix plan to partner with international programs to bring
lower-cost solutions to patients in those parts of the world most severely
stricken by HIV, regions currently under-penetrated by the pharma
industry.
Analysts’
opinions have been somewhat mixed. Some grouse that the acquisition
multiples seem high, but with the recent integration of Docpharma’s
financials into Matrix’s, Matrix’s 2006 results should be considered on a
pro forma basis so it may be some time before anyone can come up with
definitive numbers or a definitive conclusion on that score. Even so, when
Teva acquired IVAX last year, it paid 4.2x revenue and 24.6x EBITDA, so
the multiples in this deal don’t seem particularly out of line. Others see
in this deal a blueprint for future expansion in the global generic pharma
market. We tend to side with the second group, viewing India as both an
emerging power and an important market in the pharmaceutical industry that
can be ignored only at your peril.
Merrill Lynch
and DSP Merrill Lynch served as financial advisor to Mylan. ABN
Amro and UBS Limited acted as financial advisors to the selling
shareholders.
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