Carlyle Group to acquire 20 per cent stake in Piramal Pharma

The transaction worth $490 million is expected to close in 2020, subject to customary closing conditions and regulatory approvals.

Piramal Enterprises and The Carlyle Group announced that CA Clover Intermediate II Investments, an affiliated entity of CAP V Mauritius Limited, an investment fund managed and advised by affiliated entities of The Carlyle Group, has agreed to invest fresh equity capital for a 20 per cent stake in Piramal Pharma.

The transaction values the pharma business at an enterprise value (EV) of $2,775 million with an upside component of up to $360 million depending on the company’s FY21 performance. Based on the EV (excluding the upside component), exchange rate and pharma net debt as on 31st March 2020, the estimated equity capital investment for Carlyle’s 20 per cent stake in Piramal Pharma would amount to $490 million. The final amount of equity investment will depend on the net debt, exchange rate and performance against the pre-agreed conditions at the time of closing of the deal.

Piramal Pharma will include (a) Piramal Pharma Solutions, an end-to-end contract development and manufacturing (CDMO) business; (b) Piramal Critical Care, a complex hospital generics business selling specialized products across over 100 countries; (c) Consumer Products Division, a consumer healthcare business selling over-the-counter products in India; and (d) PEL’s investment in the joint venture with Allergan India, a leader in ophthalmology in the domestic market and Convergence Chemicals.

This transaction is expected to close in 2020, subject to customary closing conditions and regulatory approvals.

Ajay Piramal, Chairman, Piramal Enterprises said, “We are pleased to announce the strategic growth investment by Carlyle, a marquee global investor, in Piramal Pharma. This infusion of funds will further strengthen our balance sheet and provide us with a war chest for the next phase of our strategy. We are pleased to have an investor of this calibre join the Piramal family and continue our stellar track record of partnerships.”

Neeraj Bharadwaj, Managing Director, Carlyle Asia Partners advisory team said, “Piramal Pharma has built a strong, diversified pharma business with a solid market position and scale in each of its core business segments of Pharma Solutions, Critical Care and Consumer Products. Given global pharma industry trends, we see attractive opportunities for organic as well as inorganic growth in each of these businesses.”

Nandini Piramal, Executive Director, Piramal Enterprises said, “We are delighted to partner with Carlyle, which has extensive experience in the healthcare sector. This fresh growth investment into our pharma business will be used as growth capital for the pharma businesses to expand capacity across our sites as well as to tap attractive acquisition opportunities within and outside India. In the interim, the proceeds from this capital raise may also enable us to further strengthen our balance sheet through deleveraging in the near term.”

Greg Zeluck, Co-Head, Carlyle Asia Partners advisory team said, “This investment marks the beginning of an important partnership with the Piramal family, and further underscores our commitment to the Indian market. India is a hugely strategic part of Carlyle’s Asia business, and a market where we continue to see many attractive investment opportunities where we believe we can collaborate with management teams to drive long-term value for companies and stakeholders.”

company statement informed, “Following the sale of its domestic pharma business to Abbott in 2010 for $3.8 billion, PEL’s pharma revenue has grown 3.5 times at a CAGR of 15 per cent from Rs 1,537 crores in FY11 to Rs 5,419 crores in FY20. In this period, the pharma business EBITDA has gone up 13.0 times at a CAGR of 33 per cent from Rs 110 crores in FY11 to Rs 1,436 crores in FY20 (excluding financials of Allergan and CCPL JV), resulting in a significant improvement in the EBITDA margin from seven per cent in FY11 to 26 per cent in FY20.”

Rothschild & Co served as financial advisor; Cyril Amarchand Mangaldas and Covington & Burling LLP served as legal advisors to PEL on this transaction. J.P. Morgan served as financial advisor and AZB & Partners and White & Case served as legal advisors to Carlyle.