Procaps Group, a leading integrated international healthcare and pharmaceutical company, and Union Acquisition Corp. II (NASDAQ: LATN, LATNU, LATNW) ("LATN"), a publicly-traded special purpose acquisition company, today announced the filing of a registration statement on Form F-4 (the "Registration Statement"), which contains a preliminary proxy statement/prospectus, with the U.S. Securities and Exchange Commission ("SEC") in connection with their recently announced proposed business combination. The Registration Statement includes audited financials of Procaps Group for the full fiscal years of 2019 and 2020 and can be found here.
Expected Milestones to Completion of Business Combination Include:
Investor and analyst day - August 2021
Second quarter 2021 financial results - August 2021
Shareholder vote - September 2021
Business combination close - September 2021
Listing on Nasdaq Capital Market under new ticker symbol "PROC" - September 2021
Management Commentary
"Today's filing represents a key de-risking event to close our proposed business combination with LATN in the third quarter of 2021," said Ruben Minski, Procaps Founder, Chairman and Chief Executive Officer. "More importantly, the registration statement includes fully audited IFRS financials for our 2019 and 2020 fiscal years that are consistent with our previously communicated financials utilized during our PIPE roadshow in the first quarter of 2021. As we close the second quarter of 2021, we remain confident in our revenue and adjusted EBITDA growth trajectories and based on this, we are reaffirming our full year 2021 net revenue and adjusted EBITDA guidance of $397 million and $105 million, respectively.
"We look forward to sharing more on our developing story at upcoming institutional investor conferences and our soon to be announced investor and analyst day," concluded Minski.
Completion of the business combination, which is expected to close in the third quarter of 2021, is subject to approval by LATN shareholders and other customary closing conditions, including the Registration Statement being declared effective by the SEC. The combined company will be led by Ruben Minski, Procaps Group Founder, Chairman & CEO. Upon closing of the business combination (assuming none of the LATN shareholders redeem any of their LATN ordinary shares in connection with the approval of the business combination and including the redemption of certain shares held by IFC), existing Procaps Group shareholders are expected to hold approximately 76% of the combined company, which shares will be subject to certain lock-up arrangements.
Institutional investors have committed to an upsized private investment in public equity ("PIPE") of $100 million in ordinary shares of LATN, which will be converted into ordinary shares of the combined company upon the closing of the business combination. The PIPE will close concurrently with the business combination. Subject to any redemptions by LATN shareholders, there is approximately $136.9 million in cash currently held in LATN's trust account. It is anticipated that the combined company will have approximately $236.9 million in gross cash proceeds (before transaction-related expenses and the redemption of certain shares held by IFC) to fund organic growth through capacity expansion, plant improvements, working capital investments, e-Health platform improvements and R&D expenses, inorganic growth via accretive acquisitions and the redemption of certain shares from IFC.
While the Registration Statement has not yet become effective and the information contained therein is subject to change, it provides important information about Procaps Group's business and operations, proposed business combination with Union Acquisition Corp. II and the proposals to be considered by the LATN shareholders.
Proposed Business Combination Highlights
Procaps Group is a family-owned Latin American pharmaceutical company established over 40 years ago that has grown into a leading integrated pharma company with a presence in 13 countries and product reach in 50 markets modernizing oral drug delivery technology and manufacturing capabilities.
Procaps Group's state-of-the-art manufacturing capabilities provide innovative delivery technologies protected by an extensive IP moat and supported by industry accolades such as the first FDA-approved pharmaceutical plant in South America for selling Rx products into the U.S.
Procaps Group today is the largest pharmaceutical contract development and manufacturing organization "CDMO" in Latin America and top 3 globally in terms of volume of softgel production capacity.
As of December 31, 2020, Procaps Group employed over 4,700 people across 13 countries, and has a strong history and focus on ESG principles including resource-saving policies, HR and social programs and corporate policies.
Procaps Group generated net revenue of $331 million, Adjusted EBITDA of $85 million and Adjusted EBITDA on a constant currency basis of $93 million in 2020 and is on track to reach $397 million in net revenue and $105 million in Adjusted EBITDA in 2021. The adjusted EBITDA figures do not include any one-time add backs specifically for provisions required by IFRS. Procaps Group expects full-year Adjusted EBITDA margin expansion from 18% in 2019 to 26% in 2021 with strong positive free cash flow. Approximately 44% of Procaps Group revenue in 2020 was USD-denominated.
Transaction represents the first ever Latin American focused SPAC to include a fully committed and over-subscribed SPAC-related ordinary share PIPE.
Transaction is expected to enable further investment in growth and new product categories and positions Procaps Group to capitalize on favorable regional dynamics through organic growth in B2B & B2C segments.
Transaction also positions the Company to drive inorganic growth through a roll-up strategy focused on mid-sized companies in the region. The Company's M&A plan will focus on pharma and CDMO targets, as well as the possibility for transformational acquisitions in the future.
Transaction represents attractive entry valuation at 10.75X estimated 2021 EV/EBITDA multiple versus global CDMO and pharmaceutical industry comparable companies.
Combined company to have an implied initial enterprise value of approximately $1.1 billion, and expected gross cash proceeds of $236.9 million (before transaction-related expenses and the redemption of certain shares held by IFC) after closing, including a $100 million fully-committed PIPE.
Combined company strategically positions Procaps Group as a differentiated Latin American integrated pharma company leveraging a proprietary and proven M&A strategy that has the potential to deliver significant Adjusted EBITDA growth and margin expansion.
The PIPE was raised from a broad group of Latin American investors, healthcare investors and thought leaders. These include pan-regional funds such as Moneda Asset Management, as well as Chilean-based Consorcio Seguros, among several other unnamed global and healthcare investors.
Transaction is expected to close in the third quarter of 2021, with the combined company expected to be listed on the Nasdaq Capital Market under the symbol "PROC."
Procaps Group Business and Operational Highlights
Leading regional pharmaceutical player with global reach and accomplished management team
Founded in 1977 by the Minski Family with 4,700+ employees across 13 countries as of December 31, 2020
Net revenue of $331 mm in 2020 and projected $397 mm for 2021
Innovative delivery technologies transform branded generics into differentiated products
In-house R&D capabilities driving attractive growth opportunities
Avenues for growth with a robust pipeline and a high product renewal rate
Focus on differentiated, high margin, and high barrier-to-entry products
Leading pharmaceutical integral CDMO specialized in softgels
A preferred supplier to the global pharmaceutical companies
Top 3 global player by softgel production capacity, with strong growth potential and long-standing reputable clients including Glaxo, Pfizer and Abbott
Proprietary portfolio of branded Rx and OTC products
Positioned to capitalize on favorable regional dynamics
LatAm's pharma sales expected to outperform global growth
Healthcare expenditure expected to reach a 7% CAGR from 2020 - 2022
LatAm's aging population expected to increase boosting demand for pharma
Strong history and focus on ESG Principles
About Procaps Group
Procaps Group is a developer of pharmaceutical and nutraceutical solutions, medicines, and hospital supplies that reach more than 50 countries in all five continents. Procaps has a direct presence in 13 countries in Latin America and, as of December 31, 2020, had more than 4,700 collaborators working under a sustainable model. Procaps develops, manufactures, and markets over-the-counter (OTC) and prescription drugs, nutritional supplements and high-potency clinical solutions. The Registration Statement includes audited consolidated financial statements of Procaps Group as of and for the fiscal years ended December 31, 2020 and 2019.
About Union Acquisition Corp. II
Union Acquisition Corp. II, led by Kyle Bransfield, is a Cayman Islands exempted company incorporated as a blank check company for the purpose of entering into a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities.
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