Nirma makes big pharma push; acquires 75% in Glenmark Life Sciences for Rs 5,651 cr
Nirma, a well-established conglomerate with interests spanning various industries, has recently concluded a significant deal to acquire a substantial 75 percent stake in Glenmark Life Sciences, a company specializing in active pharmaceutical ingredients (APIs). This acquisition comes at a price of Rs 615 per share, amounting to a substantial Rs 5,651 crore investment by Nirma. It’s worth noting that this transaction places the value of Glenmark Life Sciences at an impressive enterprise valuation of approximately Rs 7,500 crore.
As per regulatory requirements set forth by the Securities and Exchange Board of India (SEBI), Nirma is obligated to extend a mandatory open offer to all public shareholders of Glenmark Life Sciences. This provision ensures that minority shareholders have the opportunity to participate in the acquisition process and make informed decisions regarding their holdings in the company.
This strategic move by Nirma not only underscores its diversification strategy but also its interest in the pharmaceutical sector, particularly in the realm of active pharmaceutical ingredients. The pharmaceutical industry has been a key focus for many conglomerates due to its resilience and growth potential, especially in the wake of global health crises.
On the other side of the deal, Glenmark Pharma, the parent company of Glenmark Life Sciences, will retain a 7.84 percent ownership stake in Glenmark Life Sciences. This suggests a strategic alignment between the two entities even after the majority stake changes hands.
It’s worth highlighting that the intention to acquire Glenmark Life Sciences was first revealed by Moneycontrol on May 23, 2023. This acquisition serves a dual purpose for Glenmark Pharma as it not only allows them to unlock value from their subsidiary but also helps them address their debt burden, a common strategic move in the corporate world to optimize financial stability and focus on core business operations.
Overall, this acquisition is a noteworthy development in the pharmaceutical and business landscape in India. It highlights the dynamism and strategic acumen of Nirma as a diversified conglomerate and the adaptability of companies in the pharmaceutical sector as they explore new avenues for growth and consolidation.
Glenn Saldanha, Chairman and Managing Director of Glenmark Pharma, expressed his satisfaction with the divestment and highlighted the significance of the strategic transaction with Nirma. He emphasized that this marks a pivotal moment in shaping an independent growth path for Glenmark Life Sciences. Saldanha’s statement underscores Glenmark Pharma’s strategic direction, which involves moving up the value chain to evolve into an innovative and brand-focused organization. The company intends to maintain its core therapeutic areas of dermatology, respiratory, and oncology as key priorities.
Moreover, Saldanha recognized the opportunity presented by this transaction to enhance shareholder value through deleveraging and improving the overall return profile. This move aligns with corporate strategies often aimed at optimizing financial stability and delivering value to shareholders.
When asked about choosing Nirma, a non-traditional player in the pharmaceutical industry, over private equity suitors, Saldanha emphasized the strategic nature of the deal. He pointed out that Nirma’s entry into the pharmaceutical sector represents a significant move for the group. Nirma has a track record of success in various businesses, and Saldanha expressed confidence in their ability to leverage this platform for further expansion. Strategic investors like Nirma typically have a longer-term and growth-oriented perspective, and they often prioritize employee welfare. This makes them a suitable choice for businesses looking to ensure continuity and sustainable growth.
Saldanha also highlighted the financial aspect of the transaction, mentioning that it was completed at an enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple of approximately 11 times. This implies that the deal is financially sound and adds to Glenmark Pharma’s overall financial strength.
In closing, he noted that once the transaction concludes, Glenmark Pharma will achieve a net cash-positive position, further strengthening its financial position and offering flexibility for future strategic moves. This divestment represents a strategic and financially beneficial decision for Glenmark Pharma, aligning with its long-term goals and shareholder interests.
The acquisition of a significant stake in Glenmark Life Sciences represents a strategic move by the Ahmedabad-based Nirma group, founded by Dr. Karsanbhai Patel, into the active pharmaceutical ingredient (API) segment. This expansion complements Nirma’s existing presence in the pharmaceutical industry, where it already deals in injectables, parentals, and ophthalmic products. The Nirma conglomerate, with an annual turnover exceeding $2.5 billion, has established itself in various sectors including industrial chemicals, detergents, soaps, cement, and real estate development. However, in recent times, it has been actively exploring inorganic opportunities in the pharmaceutical sector.
In April, Nirma acquired a 100 percent stake in Stericon Pharma Private Limited, a contract development manufacturing organization (CDMO) based in Bangalore, specializing in sterile contact lens cleaning solutions and eye drops. This acquisition complemented Nirma’s existing healthcare vertical, Aculife Healthcare, which has expanded its portfolio to include infusions, injectables, medical devices, and oral formulations, exporting its products to over 70 countries.
Hiren Patel, Managing Director of Nirma, expressed enthusiasm for this substantial acquisition and highlighted the company’s commitment to the pharmaceutical sector. He emphasized Nirma’s mission to provide high-quality healthcare products at affordable prices and sees this investment as a means to further that goal. The acquisition positions Nirma as one of the top five independent API companies in India and allows the company to contribute significantly to the “Make in India” initiative, which aims to promote indigenous research and development in the pharmaceutical sector, a crucial step in bolstering the domestic pharmaceutical industry.
The advisory team for the Nirma group included firms such as Khaitan & Co, DAM Capital, KPMG, BCG, and Eaishman, underscoring the strategic importance of this acquisition. On the other side of the deal, Kotak Investment Banking acted as the exclusive financial advisor to Glenmark Pharma and Glenmark Life Sciences, while legal advisory support was provided by S&R Associates for Glenmark Pharma and Trilegal for Glenmark Life Sciences. This comprehensive team effort reflects the complexity and significance of the transaction in the pharmaceutical sector.