Bloomberg News

Aspen Buys Merck Manufacturing Unit in Emerging Market Drive (4)

June 27, 2013

Aspen Pharmacare Holdings Ltd. (APN), Africa’s largest drugmaker, agreed to buy a pharmaceutical manufacturing unit from Merck & Co. (MRK:US) and took an option to purchase a products unit in a deal worth about $1 billion.

“The active pharmaceutical ingredients are hard to source or replicate, and this allows us strong pipelines,” Aspen Chief Executive Officer Stephen Saad said in a phone interview from the Netherlands today. “With the products bought, this should help accelerate our growth in emerging markets, especially Latin America and Asia Pacific.”

The products business consists of 11 branded finished dosage form molecules, covering therapeutic treatments such as hormone replacement therapy, oral contraception, anti-coagulant and vitamin B, Durban, South Africa-based Aspen said in a statement.

The deal brings Aspen more than 6 billion rand ($602 million) in annual sales, including $260 million from the products unit and 280 million euros from the pharmaceutical company, Saad said. The drugs unit is based in the Netherlands and has a satellite office in the U.S., where Merck is based.

The sale is the biggest divestiture by Merck since 2009, when the Whitehouse Station, New Jersey-based company sold its stake in animal health unit Merial to partner Sanofi for $4 billion. Drugmakers including Pfizer Inc. and Abbott Laboratories also have shed non-core units to focus more on inventing new, brand-name drugs.

Strategic Relationship

Merck will continue to buy active pharmaceutical ingredients from Aspen under a 10-year supply contract. “I hope it’s the start of a broader strategic relationship,” Saad said.

Funding for the purchase is “all in place” and the money will come from new debt facilities, sourced in South Africa and abroad, he said. Deferred payments will be taken from the company’s cash and no equity will be used, Saad said.

Merck gained 1.3 percent to $47.28 at 4 p.m. New York time. Aspen’s shares rose 6.1 percent to 210.14 rand in Johannesburg. The stock has gained 24 percent this year.

GlaxoSmithKline Plc (GSK) received an offer from Aspen for branded heart medicines Arixtra and Fraxiparine and a related manufacturing site on June 18. In April Aspen agreed to buy licenses to sell Nestle SA (NESN)’s infant formula in Australia and southern African countries for $215 million.

The Merck transaction is subject to the approval of antitrust authorities and the Financial Surveillance Department of the South African Reserve Bank.

To contact the reporters on this story: Janice Kew in Johannesburg at jkew4@bloomberg.net; Kristen Hallam in London at khallam@bloomberg.net

To contact the editors responsible for this story: Phil Serafino at pserafino@bloomberg.net; Celeste Perri at cperri@bloomberg.net


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