Hikma to buy Boehringer Ingelheim’s US specialty generics unit for $2.65 billion

Hikma Pharmaceuticals said Tuesday that it agreed to acquire Boehringer Ingelheim’s US specialty generics company Roxane Laboratories under a cash and stock deal valued at approximately $2.65 billion. Hikma noted that the transaction includes around $1.2 billion in cash, while the company will issue 40 million new shares to Boehringer Ingelheim priced at 23.50 pounds ($36.50) each, representing nearly 17 percent of its issued share capital.

Hikma CEO Said Darwazah remarked “this transaction has significant strategic value for us, transforming our position and scale in the US generics market.” The company suggested that the deal will make it the sixth biggest US generics provider. The executive added that Roxane’s portfolio “will create a platform for sustainable long-term growth,” while the transaction will also “significantly” expand Hikma’s manufacturing capacity and technological capabilities.

Meanwhile, Michael Raya, CEO of Hikma’s US subsidiary West-Ward, said “Roxane is highly complementary to our existing US business.” Raya remarked “we are a market leader in generic injectables. The acquisition of Roxane will significantly strengthen our non-injectables business.” The deal also includes cash payments of up to $125 million from Hikma, subject to the achievement of certain performance milestones.

According to Hikma, Roxane is expected to achieve revenue of $725 million to $775 million in 2017, with an earnings margin of approximately 35 percent over the medium-term. The drugmaker added that assuming closing of the acquisition in the fourth quarter of this year, the purchase is expected to be accretive to adjusted earnings in 2016 and “very strongly” accretive from 2017 onwards.

Max Herrmann and colleagues at Stifel Nicolaus noted that the purchase price represents about 10 times Roxane’s estimated earnings for 2017. “This represents good value,” Herman said, adding “we continue to believe the company has superior long-term growth prospects.”

Andreas Barner, chairman of Boehringer Ingelheim’s board of managing directors, said the sale will allow the company to focus “on growing our global core businesses as a research-driven pharmaceutical company.” The German drugmaker confirmed in January that it was exploring strategic options, including a sale, of the Roxane unit.

Last year, Boehringer Ingelheim sold the assets of its generic injectable drugs unit Bedford Laboratories to Hikma for up to $300 million.

29 – July – 2015