Abbott buys Piramal's formulations business

Piramal Healthcare on Friday entered into a definitive agreement with Abbot Laboratories of Illinois, U.S., to sell its domestic formulations business (also referred to as healthcare solutions business) for a total cash consideration of $3.72 billion (around Rs.17,500 crore).

Abbot will pay $2.12 billion on closing of the sale in the second half of 2010 and a further $400 million in each of the subsequent four years after the closing of the transaction, commencing in 2011.

Addressing mediapersons here, Piramal Group Chairman Ajay Piramal said “the $400 million payable annually over the subsequent four years is only a deferred payment and is not contingent on performance.”

On the rationale for selling the business, Mr. Piramal said, “in future, there would be huge value created if the business goes global as it is already strong in India. However, we would not have been able to do justice to the business globally and it makes a lot more strategic sense for the business to go where it is going.

New growth areas

“We have not sold our shareholding in Piramal Healthcare and have placed all shareholders on an equal footing. The money will go to the company and presents us with a good opportunity to create shareholder wealth in future. As the money will come into the company, we will pay long-term capital gains tax of 22 per cent and will also pay off our debt of around Rs.1,300 crore.''

Mr. Piramal said in the last 22 years, the Piramal Group had raised only Rs.100 crore in 1994 and Rs.150 crore in 2005. The sale proceeds would be invested in the retained business, in new growth areas yet to be identified and, “we will also look at giving a special dividend to shareholders.''

The formulation business of Piramal manufacture, markets and sells branded pharmaceutical products in finished form in India, Nepal and Sri Lanka. It is being sold as a going concern on a slump sale basis. (In a slump sale, an undertaking is transferred from one person to another for a lumpsum consideration without values being assigned to the individual assets and liabilities.) The assets to be transferred include the company's manufacturing facilities at Baddi, Himachal Pradesh, and the rights to about 350 brands and trademarks. Piramal has 12 units spread across India, North America and the U.K., of which Baddi will go to Abbott. The sale will also involve the transfer of around 5,500 employees.

Retained businesses

The sale is conditional upon Piramal shareholders' approval and closing conditions. Piramal and Piramal Enterprises and associates have agreed that for eight years following the closing, the company will not engage in the business of generic pharmaceutical products in finished form. However, Piramal is free to continue its retained businesses. The transaction does not have any commitment from Abbott to buy/source from Piramal.

The businesses retained by Piramal posted revenues of around Rs.1,700 crore and include custom manufacturing for third parties, critical care (including inhalation anaesthetics), over-the-counter consumer products (like the recently acquired i-pill, Lacto Calamine and Saridon), manufacture and supply of active pharmaceutical ingredients (API), vitamin and fine chemicals, diagnostic medical devices and equipment and diagnostic services, including pathology laboratories and radiology centres and clinical research services. Piramal Healthcare will continue to pursue novel drug discovery and research through its affiliate company, Piramal Life Sciences. Mr. Piramal said “our own business was growing at 25 per cent plus annually. There are lot of other opportunities as well and we will be in the domestic market by launching patented products and in the OTC space. We have a lot of faith in Indian drug discovery model and have 14 molecules in various stages of clinical trials. Our commitment in drug discovery and other business will go up and in the next couple of years, we will launch a couple of new drugs globally. That will differentiate us.''

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Printable version | May 14, 2021 10:05:27 AM |

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