Global investment firm KKR to pick up a controlling stake in Mumbai based branded formulations player JB Chemicals. As part of the deal, KKR will acquire the stake from the founding Mody family at Rs 745 per share or a 5 per cent premium to closing price on the BSE and also make an open offer for an additional 26 per cent of the company. The deal size is estimated to be around $500 mn.
According to a BSE notification, KKR has entered into an agreement to acquire 41.7 mn shares of JB Chemicals that represents 54 per cent stake from promoters of the company. This would be at a price of Rs 745 per share. After this transaction, an open offer will be launched to acquire about 20.93 mn fully paid up equity shares of JB Chemicals, which represents 26 per cent stake. The open offer too is being made at a price of Rs 745 per share.
The total deal size thus will be around $500 mn or around Rs 3,750 crore. The BSE statement also noted that once the acquirer has acquired 54 per cent stake, the sellers have the right (but not an obligation) to sell such number of additional equity shares that KKR’s aggregate shareholding in JB Chemicals does not exceed 64.9 per cent.
J.B. Mody, Founder, Chairman and Managing Director of J.B. Chemicals, said, “For more than four decades, J.B. Chemicals’ mission has been to deliver affordable, high-quality pharmaceutical products that improve the lives of individuals living in India and around the world. We are thrilled that KKR – with its deep knowledge of the pharmaceutical industry and experience in investing in the sector, as well as its extensive investments in India – will take our mission forward and build on the foundation of core values that our family has instilled in this company. This will also create growth opportunities for our people to progress.”
JB Chemicals, that started as an active pharmaceutical ingredients (API) maker in the late seventies, owns some of the top brands in the Indian market – Rantac (ranitidine or antacid), Cilacar (cardiac medicine), and Metrogyl (amoebicides). With a sales force of around 2000 people it had a turnover of Rs 1640 crore in FY20. It ranks among the top 40 companies in the domestic market. It also has an exports product basket of 500 products that it exports to over 40 countries and also has contract manufacturing capabilities for injectables, topicals, lozenges, herbal liquids and oral solids.
Sanjay Nayar, Partner and CEO of KKR India, said, “We are pleased that the promoters of J.B. Chemicals have selected us to take over their rich legacy and to help the company continue its expansion, which is clearly driven by its diversified product portfolio and state-of-the-art manufacturing capabilities. We believe J.B. Chemicals has an opportunity to accelerate its growth and leverage its strengths to enter into new therapeutic areas. We look forward to working with the management team to build on the company’s strong foundation, and believe this investment underscores KKR’s ongoing commitment to India’s long-term economic prospects and the potential of its companies.”
In India KKR’s pharma investments include Max Healthcare and Radiant Life Care. It sold its stake in Gland Pharma to China’s Fosun in 2016 for $1.4 billion.
KKR will fund this investment from Asian Fund III. The transaction is subject to regulatory and other customary approvals.
Avendus Capital served as financial advisor to the Promoters of JB. Chemicals, and Platinum Partners (Mumbai) acted as legal counsel. Moelis & Company served as financial advisor, EY as accounting and tax diligence advisor, and Shardul Amarchand Mangaldas & Co. and Simpson Thacher & Bartlett LLP acted as legal counsel to KKR. ICICI Securities Limited will be acting as the manager to the public tender offer.