Alpharma divests API business to 3i for $395 million

07 February 2008

Specialty pharmaceutical multinational Alpharma Inc today announced the sale of its active pharmaceutical ingredients (API) business to private equity and venture capital group 3i for $395 million. There is no financing condition obliging 3i to conclude the transaction.

For the nine months ended 30 September 2007, Alpharma's API had net sales of $138.7 million and operating income of $30.7 million. The sale includes manufacturing facilities in Copenhagen, Denmark; Oslo, Norway; Budapest, Hungary; and Taizhou, China.

The final purchase price is subject to adjustment based on the closing net cash balance and working capital of the business and is Alpharma expects to generate net proceeds, after taxes, fees, and expenses, of approximately $365 million, which it plans to reinvest the proceeds in its pharmaceutical and animal health divisions.

"We believe this diversified combination positions us well to deliver strong growth with a stable foundation in the years to come," said Dean Mitchell, president and chief executive officer of Alpharma. "In addition, the increased focus and decreased complexity of our business mix, combined with a potential share buyback, will enable us to enhance value to our shareholders."

Though it has been investing continually in its API business, Alpharma's decision to divest the business was partly due to margin pressures caused by the emergence of Indian and Chinese competitors, who as Mitchell said, "have very different expectations in terms of profitability they expect to see form their API businesses."

He said big pharma companies, concerned about their cost-base, were becoming much more opened-minded about sourcing their API products from low-cost markets.