Apax mulls sale of Neuraxpharm to lock in pharma sector premium: sources

Industry:    2020-07-10

Buyout group Apax is preparing the sale of German pharma group Neuraxpharm to try to lock in high valuations in the healthcare sector, fuelled by the coronavirus pandemic, sources familiar with the matter said.

Apax has already held talks with several private equity firms to gauge their interest in the maker of antidepressants, painkillers and other products for the central nervous system and which could be valued at 1.2-1.4 billion euros, they said.

An auction of the generics maker, which also sells medical cannabis, could launch in the European autumn, some of the people said, while other sources said Apax might opt to allow for more time before kicking off a sales process.

Apax has so far not hired an investment bank to handle a potential exit, while Rothschild or Jefferies are being tipped as possible advisers on an eventual deal, the sources said.

Global M&A activity tumbled to its lowest level in more than a decade in the second quarter, as companies gave up on expansion plans to focus on protecting their balance sheets in the wake of the coronavirus outbreak.

Healthcare is one of the few sectors that is expected to see only a relatively small 2020 impact on dealmaking from the pandemic, investment bankers say.

“Healthcare valuations are high and some investors will now try to lock in premiums fuelled by the pandemic”, one banker said.

Other people said that Apax could wait until financing markets are back at pre-crisis levels for private equity buyers seeking cheap debt for buyouts.

Neuraxpharm is expected to report earnings before interest, tax, depreciation and amortisation of about 95 million euros ($107.58 million) this year and could be valued at 13-15 times that, the sources said.

Private equity groups including KKR, Advent, Nordic Capital, Bridgepoint, EQT, Cinven and Bain are being targeted as potential buyers, they added.

Apax bought Neuraxpharm in 2016 and combined it with Invent Farma and later it strengthened the company through add-on acquisitions such as FB Health and Farmax.

Credit ratings agency Moody’s said in January that after Neuraxpharm paid its owners a 90 million euro dividend, it expected leverage to remain above 6-time core earnings at least until 2021, despite sound profitability with an adjusted EBITDA margin of around 27%.

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