Lupin to sell entire stake in Japanese subsidiary Kyowa for over Rs3,702 cr

Pharmaceuticals major Lupin on Monday said its board has approved the sale of its entire stake in Japanese subsidiary Kyowa Pharmaceutical Industry to Japan-based private equity fund Unison Capital Partners for an enterprise value of Japanese Yen 57,361 million (Rs3,702.4 crore).

The Mumbai-based company has entered into a definitive agreement for sale of its entire stake (99.82 per cent) in Kyowa, Lupin said in a statement.
Under the terms of the agreement, Lupin's subsidiary Nanomi BV will divest its entire stake in Kyowa to Unison's entity Plutus Ltd for an enterprise value of Japanese Yen 57,361 million, it added.
"This transaction is aligned with our vision to focus on our key markets and strategic priorities to achieve sustainable growth in the mid to long-term," Lupin CEO Vinita Gupta said.
The deal proceeds will be utilised to strengthen the company's balance sheet as well as provide growth capital to support organic and inorganic initiatives for our focus markets, she added.
As per the company, the deal would help reduce its net debt to Rs 1,129 crore as compared with Rs 4,361.8 crore as on September 30, 2019.
"We believe that the partnership with Unison will enable Kyowa to leverage its strong platform and human capital to achieve its full potential. We remain committed to advancing our complex generics, biosimilars and specialty portfolio globally, including Japan," Lupin managing director Nilesh Gupta said.
Commenting on the deal, Unison Founding Partner Tatsuya Hayashi said: "We look forward to actively working with Kyowa to leverage our unique set of resources in the healthcare market – including our own portfolio companies, and our network of experienced healthcare advisors and strategic partners – to enable Kyowa's vision of growth."
The proposed transaction will generate post-tax net cash inflow of approximately JPY 32,596 million (Rs2,103 crore).  The transaction is expected to be EPS accretive and will significantly strengthen the consolidated balance sheet of the company. 
Post transaction net debt of the company will stand at Rs1,129 crore against Rs4,361 crore as of 30 September 2019.
Net debt to equity ratio will improve to 0.08 against 0.32 as of 30 September 2019.
“We are very pleased to partner with Unison, a leading healthcare focused private equity player. This transaction will build upon the strong foundation our team has established in Japan,” Vinita Gupta, CEO, Lupin said.
“This transaction is aligned with our vision to focus on our key markets and strategic priorities to achieve sustainable growth in the mid to long-term. The deal proceeds will be utilised to strengthen Lupin’s balance sheet as well as provide growth capital to support organic and inorganic initiatives for our focus markets,” she added.
“Driven by the incentives provided by the Japanese government to increase generic utilisation and our R&D, manufacturing and commercial strengths, we grew the Kyowa business multifold in the last 12 years to emerge as the 5th largest generic company in Japan, Nilesh Gupta, managing director of Lupin, said.
“This transaction leverages Kyowa’s strong position in CNS generics, long-listed and specialty products with Unison’s investments in healthcare to create a leading CNS healthcare player,” he added.
“We are delighted to welcome Kyowa into our portfolio and support its next phase of growth,” Tatsuya Hayashi, founding partner of Unison, said, adding, “We look forward to actively working with Kyowa to leverage our unique set of resources in the healthcare market – including our own portfolio companies, and our network of experienced health care advisors and strategic partners – to enable Kyowa’s vision of growth. We also look forward to supporting Kyowa’s partnership with Lupin and exploring opportunities for Unison to collaborate further in the healthcare sector with Lupin and its unparalleled global network in the healthcare industry.”
Unison Capital, Inc was founded in 1998 and is an independent private equity firm with operations in Japan, Korea and Singapore. A pioneer in the private equity industry in Japan, Unison is also a leader in healthcare investments, with an emphasis on investments in the pharmaceutical sector.
The transaction will be subject to customary closing conditions including approval by Lupin’s shareholders.