Indian arm of Japanese medical technology leader, US$ 700-mn Arkray Group will acquire the In-Vitro Diagnosis (IVD) business of Gujarat-based Span Diagnostics Ltd (Span). The enterprise value of the transaction is estimated to be around Rs.100 crore.
A meeting of the board of directors of Span, India's leading manufacturer of diagnostic products and a major supplier of HIV test kits for the National AIDS Control Programme, last evening (January 23), approved the transfer of its business undertaking, as a going concern comprising In-Vitro Diagnostics (IVD) business on a slump sale basis to Arkray Healthcare Private Limited, the Indian arm of Arkray, Inc. The board also approved the sale of Span Diagnostics’ ownership interest in its relevant subsidiary.
Subject to the requisite approvals, including a shareholder approval via postal ballot and the satisfaction of conditions precedent, the transaction is expected to close within approximately three to four months.
“What is most interesting about the deal is that it will unlock the potential of India’s medical devices sector in general and booming in-vitro diagnostic industry in particular. IVD market is currently worth Rs.2000 crore and forms just below 3 per cent of the healthcare market, but offers greater space for growth,” said Mahesh Singhi, MD of Singhi Advisors, who were the exclusive financial advisors to Span Diagnostics.
“Besides giving a big boost to the FDI story in the domestic healthcare sector, it is also a trend-setting transaction in the Indo-Japanese corridor, reaffirming that many Japanese players are keen to enter India if they get the right opportunities,” he added.
Mizuho Securities represented Arkray in the transaction. Wadia Ghandy and Vaish Associates acted as legal advisors to the seller and buyer respectively.
The deal, bringing together the synergies on both the sides, will reaffirm Arkray Healthcare as the leader in the IVD market which is growing 15 per cent annually and is expected to keep the pace for at least another five years. The IVD reagent market size is pegged at Rs.700 crore and the IVD Instruments market size is worth Rs.1400 crore.
“We welcome this transaction as it provides our customers, suppliers, employees and other stakeholders an opportunity to leverage upon the additional technical, financial and marketing strengths of Arkray Healthcare, while unlocking significant shareholder value” said Dr. Pradip Desai, founder chairman and whole-time director of Span Diagnostics.
"This strategic action will advance Arkray Healthcare into the leading position in India, one of the world’s most rapidly growing markets with potential for further expansion," said Takeshi Matsuda, president & CEO, Arkray, Inc.
"Our strong position in Japan and growing presence in emerging markets is part of our ongoing diversification and expansion strategy, complementing our state-of-the-art offerings in developed markets. At the completion of this transaction, Arkray Healthcare will have an enhanced product portfolio as well as sales channel and domain skills, which will strengthen our market position” he added.
Kyoto-based Arkray, one of Japan’s leading companies in the area of in-vitro diagnostics, is engaged in research, development, manufacture, service and distribution of in-vitro diagnostics products. Arkray, Inc is one of the world’s leading companies manufacturing glyco-haemoglobin A1c test device, automatic analyzer for urine testing, blood glucose device for self monitoring and other wide ranged product lines and supplying them to over 80 countries worldwide.
Singhi Advisors is an independently owned, well researched and proactive global investment banking firm, providing result oriented services in mergers & acquisitions (M&A) and capital raising for last two decades. With a team of over 40 aggressive & experienced professionals working across six offices in India, Australia & Mauritius, Singhi Advisors has an enviable track record of closing over 100 prestigious domestic and international transactions in last five years, valued over US$ 4.2 billion, in 18 unique sub-sectors across 20 countries, dealing with the global giants.