Concordia Healthcare Corp, a diverse healthcare company focused on legacy pharmaceutical products and orphan drugs, has entered into a definitive agreement with Cinven, a leading European private equity firm, and certain funds managed by it (collectively, Cinven) and certain other persons, to acquire Amdipharm Mercury Limited (AMCo), British based global pharmaceutical company, for approximately US$3.5 billion to be paid through a combination of cash, common shares of Concordia, and performance-based earn-out payable in cash.
The acquisition has been approved by the Board of Directors of both Concordia and Cinven, and is strongly supported by the AMCo management team.
“This acquisition is a key milestone and pivotal turning point in Concordia’s strategy, which gives us the platform to take our business to the next level. We are not only acquiring products and commercial infrastructure, but a seasoned management team who has done a fantastic job of building a solid and successful international pharma operation,” said Mark Thompson, Concordia’s chairman and chief executive officer.
“The combination of our highly complementary yet geographically diverse businesses is truly transformational. It will uniquely position the combined company as a leading, international pharmaceutical company with extensive geographic reach, a diversified and attractive product portfolio, and an asset-light business model that we expect will allow us to focus investments and resources on further growing our business.”
The strategic acquisition is expected to transform Concordia’s growth platform, by allowing it to drive organic growth across the business and greatly enhance its M&A strategy though global opportunities. John Beighton, chief executive officer of AMCo, added, “We look forward to being part of the Concordia business – as the combination with AMCo is expected to create significant opportunities for further growth in the global pharmaceutical sector. We have a shared vision for growth that should greatly benefit employees and stakeholders of the combined business.”
AMCo has a strong international footprint with sales in more than 100 countries, and is anticipated to serve as a platform for further expansion by Concordia on a global scale. AMCo also has a strong competitive position on the vast majority of its products, driven by complexities in their manufacturing and regulatory processes. The acquisition will provide Concordia with a well-diversified niche portfolio of more than 190 well-established off-patent molecules, as well as entry into new therapeutic areas such as endocrinology, ophthalmology and urology.
The combined company creates global platform to drive continued expansion and positions Concordia as a leading, international specialty pharmaceutical company with commercial reach in over 100 countries, adds a diversified, attractive portfolio of more than 190 complementary, niche pharmaceutical products with high barriers to entry. It is expected value creation through financial scale and resources. On a pro forma basis for the full year 2015, AMCo expects to record revenue of US$530 million – $560 million. AMCo has experienced historical strong financial performance, with 2012-2014 revenue CAGR of 18 per cent, high margins and historical cash flow conversion of approximately 90 per cent. On a pro forma basis, the combined company is expected to achieve revenue of US$870 million – $920 million for full year 2015 and adjusted EBITDA4 of US$510 million – $540 million for full year 2015.
The total purchase price will consist of cash consideration of approximately £800 million (approximately US$1.2 billion), 8.49 million common shares of Concordia (approximately US$0.7 billion), and the assumption of approximately US$1.4 billion AMCo net debt upon closing, as well as a maximum performance-based earn-out of £144 million payable in cash in the fourth quarter of 2016 (approximately US$220 million). Following the closing of the transaction, Concordia will own a 100 per cent stake in AMCo, and Cinven will hold an expected 19.9 per cent ownership in Concordia on a non-diluted basis and before giving effect to the anticipated equity offering.
Accordingly, Cinven will, concurrently with the completion of the acquisition of AMCo, enter into a governance agreement with Concordia whereby Cinven will agree to customary lock-up, standstill and transfer restrictions.
The transaction is anticipated to be financed through a combination of term loans, bonds and a public offering of equity securities under Concordia's existing shelf prospectus. The acquisition, which is expected to close in the fourth quarter of this year, is subject to satisfaction of certain customary closing conditions (including stock exchange approval for the consideration shares that are issuable as part of the purchase price).
Goldman, Sachs & Co. is acting as financial advisor to Concordia, and Sullivan & Cromwell LLP, Fasken Martineau DuMoulin LLP and Simmons & Simmons LLP are acting as legal counsel. Jefferies and Rothschild are acting as financial advisors to Cinven, and Clifford Chance, Torys LLP and Jones Day are acting as legal Chicago, Illinois.