US private equity giant KKR & Co. Inc. has emerged as the front-runner to buy a 51% stake in JB Chemicals and Pharmaceuticals Ltd, which manufactures popular over-the-counter drugs rantac and metrogyl. Two persons confirmed that the companies are in discussion.
The proposed acquisition, which would include an open offer, could cost ₹2,500- ₹3,000 crore in an all cash deal that is likely within a month, said the first person.
“The discussion is in advanced stages. A premium of 10-20% to the market value of JB Chemicals can be expected because it is a bulk acquisition involving change in control. The transaction should value the company at ₹5,000-6,000 crore,” added the first person.
KKR declined to comment on the development.
Rothschild and Co. has been appointed merchant banker by JB Chemicals for the proposed stake sale. The Mumbai-based pharma company had been discussing the majority stake sale with several private equity players over the past few months.
The company promoters — Jyotindra B Mody and his family — have been trying to sell at least 51% of the company’s stake from their 55.91% since May 2019.
The group has a presence in several regulated and semi-regulated markets, including Russia and countries of the Commonwealth of Independent States. Its manufacturing units are in Ankleshwar, Panoli (Gujarat) and Daman and Diu.
Over the past few months, deal talks in the country’s pharmaceutical sector have intensified as several companies are available at better valuations than earlier and drug inventory levels have declined due to the covid-19 outbreak.
According to a data from the market research firm AIOCD AWACS, the country’s drug inventory in the market shrank in the first two weeks of May, indicating that sales have picked up after a lull in April.
Till 15 May, the overall inventory in the Indian pharma market was 39 days, compared to 43 days in the first half of April.
On 7 April, Mint reported that a couple of American buyout funds have evinced interest to invest ₹3,500-4,000 crore to acquire a 20% stake in Piramal Group’s proposed pharmaceutical entity that would combine the group’s pharma businesses.
The deal, once completed, may value the Piramal Group’s overall pharma business at $2.5 billion.
Mukesh Ambani-promoted Reliance Industries Ltd (RIL) is also reportedly in advanced discussions to acquire a majority stake in online pharmacy Netmeds for up to ₹15 crore including a fresh infusion to expand its operations, according to a recent report by The Times of India.
Reliance, previously had acquired 82% in Bengaluru-based C-Square Info Solutions, which makes software for distributors, retailers and sales force in the pharma sector for ₹82 crore.
On 6 May, The Economic Times reported that global buyout funds KKR, Carlyle, Apax Partners, and PAG have submitted non-binding bids to acquire JB Chemicals and Pharmaceuticals Ltd at a valuation of about ₹5,000 crore.
