Matrix Laboratories Ltd has decided to acquire a controlling stake in the Belgium-based Docpharma NV at a cost of $263 million.
The company said that their Board of Directors has approved to acquire a controlling stake in Docpharma from Chairman and founder, Leon Van Rompay, and other key shareholders. The Share Purchase Agreements (SPAs) covering 1,370,085 shares (approximately 22 per cent of shares outstanding) were signed on Sunday in Hyderabad.
Matrix will pay EUR 34 for each share acquired, representing a premium of 19.3 per cent on the one-month average share price and a premium of 13.3 per cent on the last trading price as of 17th June 2005. Closing of the SPAs is scheduled on or before 8th July 2005, subject to incorporation of a wholly-owned Belgian subsidiary company of Matrix which will acquire the shares under the SPAs.
As of closing of the SPAs, Matrix will acquire control over Docpharma, by virtue of article 13.2 of the Articles of Association of Docpharma. Consequently, Matrix will launch a mandatory public takeover bid at the same price for the remaining shares held by the public shareholders of Docpharma in accordance with applicable Belgian take-over regulations, according to a company release.
Commenting on the transaction, N Prasad, chairman & CEO of Matrix stated: "The acquisition of Docpharma accelerates our evolution as a growing force within the global generic pharmaceutical industry. This transaction allows us to gain direct access into the under-represented, high growth generic pharmaceutical markets of Belgium and southern Europe."
He added, "We will continue our strategy of partnering with the generic companies world-wide, while continuing to develop our presence in Docpharma's target markets. Docpharma's strengths in product selection, branding, marketing and distribution are highly complementary to our traditional strengths in product development and manufacturing."
Leon Van Rompay, CEO and founder of Docpharma, commented: "This is a strategically important step in the development of Docpharma. The combination with Matrix will create a vertically integrated player providing Docpharma with significant economies of scale and improvements in terms of product sourcing, product development and production cost and speeds up our ability to bring products to market. This partnership will enable us to accelerate the growth of our combined businesses in Europe. The markets in which we operate continue to offer enormous potential and with the support of Matrix Laboratories, providing outstanding quality products produced according to FDA and European cGMP standards, we very much look forward to taking full advantage of these opportunities."
The value of the transaction, at the offer price of EUR 34 per share, amounts to EUR 214 million (USD 263 million). After accounting for Docpharma's net cash position and its own shares held by the Docpharma group, the enterprise value amounts to EUR 193.85 million (USD 238 million).
However, in order to demonstrate their ongoing commitment to the combined Matrix-Docpharma business strategy, Leon Van Rompay and family have agreed to accept a deferred payment for 65 per cent of their consideration amounting to USD 25.02 million.
Out of the deferred payment, an amount of USD 5.77 million shall be paid at the expiry of 12 calendar months from the date of the closing of the transaction and the remaining amount of USD 19.25 million shall be paid after a period of three years. The deferred payment by Matrix shall accrue an annual interest of 2.5 per cent. Whereas, 35 per cent of their consideration amounting to USD 13.47 million will be paid in cash at the time of closing of the transaction, the release added.
Matrix would retain Docpharma's brands and trade names in their markets. Matrix and Docpharma have agreed that Leon Van Rompay and Stijn Van Rompay will remain as CEO and COO of Docpharma, respectively.
Matrix will initially finance the transaction through a combination of cash on hand and bank borrowings. Matrix will consider, if required, raising funds in the capital markets to reduce the bank borrowings post-transaction.
On June 1, 2005, the Board of Directors of Matrix and Strides Arcolab Ltd announced their intention in principle to merge. The two companies are currently in the process of carrying out due diligence.