On May 5, 2016 AMRI (NASDAQ: AMRI) reported that it has signed a definitive agreement to acquire all outstanding shares of Prime European Therapeuticals S.p.A., also known as "Euticals", in a transaction valued at approximately $358 million (EUR 315 million), consisting of shares of AMRI common stock, cash, and a seller note (Filing, 8-K, Albany Molecular Research, MAY 6, 2016, View Source [SID:1234512067]).
Euticals is a privately-held company headquartered in Lodi, Italy, specializing in custom synthesis and the manufacture of active pharmaceutical ingredients (APIs). It operates a network of API facilities primarily in Italy, Germany, U.S. and France.
"The acquisition of Euticals will provide us an established custom synthesis presence in Europe and will further build on our expertise in complex APIs, positioning AMRI as a preeminent provider of contract research, development and manufacturing services to the pharmaceutical industry," said William S. Marth, AMRI’s president and chief executive officer.
"Euticals’ expertise with niche and high barrier to entry technologies and products, including certain tetracyclines, monobactams, sterile and fermented APIs and controlled substances, will be a tremendous asset to us. Additionally, Euticals’ large base of over 400 customers will provide us with a number of new large pharma, biotech and generics partners, further extending our global reach and diversifying our revenue.
"Importantly, I am pleased that in connection with the closing of the transaction, Fernando Napolitano will be joining our Board of Directors on behalf of Lauro Cinquantesette, S.p.A (Lauro 57) and its majority investors, Clessidra Capital Partners II and Mandarin Capital Partner SCA SICAR. Clessidra’s and Mandarin’s combined expertise, deep contacts within the European pharmaceutical community and continued guidance will be invaluable to our efforts going forward. Margalit Fine, Euticals’ chief executive officer and former head of European API at Teva, will be leading Euticals’ operations as a senior executive for the combined company," Mr. Marth said.
"On behalf of Lauro 57 and its investors, we couldn’t be more pleased to be joining AMRI," said Clessidra Chief Executive Officer, Maurizio Bottinelli. "Its expertise in developing and manufacturing complex pharmaceutical products is well known and we look forward to joining forces to further expand our presence in the European community."
Strategic Benefits of the Transaction
· Significantly expands AMRI’s capabilities in custom and complex APIs
o Provides AMRI with an established European custom synthesis presence
o Expands expertise in multiple areas: sterile API, steroids, generics, fermentation, controlled substances and monobactams
o Provides an API portfolio that includes 50 active US Drug Master Files (DMFs), 17 EU Certificates of Suitability (COS) or Compliance with the European Pharmacopeia (CEP), 13 Japanese DMFs and 6 South Korean DMFs; with several APIs having filings in more than one of these areas and over two dozen other international filings
· Provides AMRI with global scale and a diverse customer and revenue base
o Euticals brings over 400 customers with no customer concentration
o With 75% of revenue outside North America, Euticals opens up many new markets for AMRI; more than half AMRI’s combined proforma revenue is expected to be ex U.S.
o Euticals brings additional portfolio diversification in generics; AMRI to leverage U.S. base to include Euticals’ strong generic portfolio
Euticals operates a highly regarded API, custom synthesis and fine chemical development and manufacturing business with 2015 revenue and EBITDA of approximately $245 million and $27 million respectively. On a stand-alone basis, Euticals’ full year 2016 revenue is forecast to be between $245 million and $255 million, with adjusted EBITDA1 of between $34 million and $38 million, implying a purchase price multiple, prior to anticipated synergies, of approximately 9.9 times 2016 adjusted EBITDA at the midpoint of the range and excluding deal related costs or purchase accounting impacts. The transaction is expected to be accretive to AMRI’s 2016 non-GAAP diluted earnings per share. AMRI expects to generate operational synergies of $13 to $15 million over the next three years. On a pro forma basis including synergies, AMRI’s full year 2017 revenue is forecast to exceed $750 million, with adjusted EBITDA margins of approximately 20%.
Transaction Details, Financing and Closing
AMRI expects to finance the transaction through the issuance of approximately 7 million shares of AMRI common stock (currently valued at $110 million, equal to approximately 19.75% of AMRI common stock); a seller note of $63 million; and the remainder in cash. Including Euticals, AMRI believes that it will have the financial strength to manage its increased debt and plans to de-lever based on a combination of EBITDA growth and/or principal re-payments.
AMRI has entered into debt financing commitments with JP Morgan and Barclays for amounts that are expected to be sufficient to provide funds necessary to consummate the transaction. In addition to the financing, the closing of the transaction is subject to customary closing conditions, including Hart-Scott-Rodino clearance in the U.S.
1EBITDA reflects IFRS with an adjustment to U.S. GAAP only for capitalization of R&D expenses
The 7 million shares of AMRI common stock (the "Shares") to be issued in connection with the transaction will be offered and sold outside the United States to Lauro 57, an eligible investor pursuant to Regulation S of the Securities Act of 1933, as amended (the "Securities Act").
The Shares have not been registered under the Securities Act, or the securities laws of any other jurisdiction, and may not be offered or sold in the United States absent registration under or an applicable exemption from such registration requirements. This press release does not constitute an offer to sell, or a solicitation of an offer to purchase, the Shares in any jurisdiction in which such offer or solicitation would be unlawful.
Nomura acted as exclusive financial advisor to AMRI in connection with this transaction and Goodwin Procter LLP and LCA Studio Legale acted as AMRI’s legal advisors. Lincoln International acted as sole financial advisor to Lauro 57, and Chiomenti Studio Legale and Debevoise & Plimpton LLP acted as Lauro 57’s legal advisors.
Use of Non-GAAP Financial Measures
This press release contains non-GAAP financial measures, such as EBITDA, which is adjusted to exclude, among other things, the impact of interest income and expense, depreciation and amortization expense, and income tax expense or benefit. We exclude these items from the non-GAAP financial measures because they are outside our normal operations. There are limitations in using non-GAAP financial measures, as they are not prepared in accordance with generally accepted accounting principles, and may be different than non-GAAP financial measures used by other companies. In particular, we believe that the inclusion of supplementary non-GAAP financial measures in this press release helps investors to gain a meaningful understanding of our core operating results and future prospects without the effect of these often-one-time charges, and is consistent with how management measures and forecasts the company’s performance, especially when comparing such results to prior periods or forecasts. Non-GAAP results also allow investors to compare the company’s operations against the financial results of other companies in the industry who similarly provide non-GAAP results. The non-GAAP financial measures included in this press release are not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP. It is not feasible to provide reconciliation to the most comparable projected U.S. GAAP measure because the excluded items are difficult to predict and estimate and are primarily dependent on future events.
Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:
Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing
Schedule Your 30 min Free Demo!