Watson Pharmaceuticals buys Ascent Pharmahealth Ltd. for $393 million
PARSIPPANY, N.J.—Watson Pharmaceuticals Inc. has acquired Ascent Pharmahealth Ltd., the Australia and Southeast Asia generic pharmaceutical business of India-based Strides Arcolab Ltd., for AU$375 million in cash, or about $393 million in U.S. dollars, making Watson the fifth-largest generic pharmaceutical company in Australia based on revenue.
In addition, the combined company will be the second-largest in that market in terms of total molecules. Because of this deal, Watson also becomes the largest generics company in Singapore and gains an established commercial base in Malaysia, Hong Kong, Vietnam and Thailand. Watson expects the transaction to be immediately accretive to 2012 non-GAAP earnings.
Ascent has been serving markets in Australia, Singapore, Malaysia, Hong Kong, Vietnam, Thailand and other Asian countries with a range of generic pharmaceuticals, consumer skincare and over-the-counter (OTC) medicines. Ascent is reportedly one of Australia's leading suppliers of healthcare products to pharmacies and is ranked among the top-five generics companies in the Australian market. Watson notes that it is also a major player in the consumer health market with well-established brands like Avene, Hairy Lemon, Estelle and Dermorganics organic skincare products.
In addition, Ascent brings into the Watson fold a regional manufacturing facility located in Singapore that manufactures prescription and OTC products in various dosages for the Southeast Asia market.
Ascent markets notes just a broad portfolio of generics but also branded and branded-generic products, and enjoys a share of the Australian market that sits at approximately 14 percent. In the Southeast Asia market, Ascent markets branded-generics and OTC products and is supported by a sales force of approximately 45 representatives. The company employs some 300 employees in Australia and Southeast Asia in totaly, and Ascent's businesses in Australia and Southeast Asia had total sales of approximately AU$150 million in 2011, or about $157.2 million in U.S. dollars.
"We are committed to expanding our international commercial operations into geographies where we can capitalize on our existing assets and participate in growing and emerging markets," said Paul Bisaro, Watson's president and CEO. "This acquisition immediately establishes Watson among the leaders in the AU$12 billion Australian pharmaceutical market, where the generic market is growing at approximately 8 percent. This acquisition complements our existing generic development and marketing capabilities in the important Australia market, and catapults us to a top five position that would have taken considerable time and investment to build organically. It also provides us with a leadership position in Southeast Asia, a region with more than 600 million consumers and overall annual generic sales of approximately AU$4 billion a year, which is projected to grow at more than 8 percent annually."
"The acquisition of Ascent provides Watson with a successful commercial structure in both Australia and Southeast Asia; we will retain the proven sales and marketing teams that have driven Ascent's growth; we will have a larger portfolio of products, and gain a broader pipeline of products to support continued growth," Bisaro added. "We anticipate a seamless and rapid integration of the Ascent businesses."
Watson currently operates in the Australian marketplace through its subsidiary, Spirit Pharmaceuticals, which supplies products to third parties and has what Watson call "a successful development track record and robust pipeline of products, including significant patent challenges." Watson also operates through its Willow Pharmaceuticals subsidiary, which develops, sources and markets products with an emphasis on injectables. During 2010, the Company established the Watson Pharma Co. to consolidate its position in Australia and support growth in the marketplace. Watson anticipates that it will be that entity that will directly manage the Ascent assets.
"The sale of Ascent is a value-enhancing and forward-looking initiative for Strides," said Arun Kumar, executive vice chairman and group CEO of Strides Arcolab. "We have been clear about our intention to focus on our highly attractive steriles segment, which we expect to be our growth engine going forward. The transaction further facilitates the execution of this strategy and unlocks significant value for the [Strides Arcolab] group. Furthermore, the proceeds from the transaction considerably strengthen our balance sheet. We believe that Ascent and its employees in Australia, Singapore and all of its other markets will benefit from the continued development under its new owners."
Watson funded the transaction using a combination of cash-on-hand and money borrowed from its revolving credit facility. The transaction was signed and closed simultaneously.
Following the announcement of the deal, Strides share prices climbed 17 percent, the biggest jump the company has seen since mid-2004, to 478.50 rupees at the close in Mumbai trading.