Aurobindo Pharma acquires Apotex’s businesses in 5 countries for 74 million euros

Aurobindo Pharma expands its presence in Europe with latest acquisition

Aurobindo Pharma has signed a definitive agreement to acquire Apotex’s businesses in Czech Republic, Poland, Spain, Belgium and the Netherlands for 74 million euro. As per the deal, Aurobindo will acquire the commercial infrastructure, including experienced personnel, products, marketing authorizations and dossier licence rights in Poland, the Czech Republic, the Netherlands, Spain and Belgium.

Why is this important

Aurobindo acquired the business for a consideration of EUR74 mn, valuing the business at ~0.56X FY2018 sales.

Aurobindo generated revenues of ~US$675 mn in FY2018, and the acquisition will:

  • Enable to accelerate growth by providing market access in Eastern Europe, predominantly, Poland (FY2018 revenues: EUR43.3 mn) and Czech Republic (FY2018 revenues: EUR 16.6 mn), and almost double its revenues in Netherlands to ~US$100 mn.
  • Also make Aurobindo the #1 player by volumes in the OTC segment.
  • Provide Aurobindo with a manufacturing facility in the Netherlands with ~1.8 bn tablets capacity annually.

While the acquisition will add to Aurobindo’s net debt, taking it to `37 bn in FY2019, the balance sheet remains strong with net debt/EBITDA comfortably below 1X.

How will the stock be impacted

With the 3rd acquisition in Europe, Aurobindo will improve its presence in Europe and we expect the contributions from this region to improve significantly as we believe there is a scope to accelerate the Apotex business growth. We further expect the acquisition to be EPS accretive  and hence we expect the stock to perform well over the medium term.
Aurobindo Pharma Ltd. ( CMP: 597, Mcap: 34,979 crores, FY20E P/E 12x)

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