Dechra expands vaccines operation with £36m Croatian deal
PET pharmaceuticals group Dechra is to acquire a near two-thirds stake in an animal health products manufacturer in Croatia as part of a £36m deal.
The group, which has a large operation in Shrewsbury, has reached an agreement with Marijan Hanžeković to acquire his 63.3% holding (equivalent to 69% voting rights) in Genera, a Croatian listed pharmaceutical business.
Dechra is offering €23.66 (£16.63) per share, which is equivalent to €51.4m for the entire share capital on a cash free debt free basis. The €23.66 per share is a 42.5% premium to the closing price on July 31, 2015 and an 81.6% premium based on the average price for the last three months. This will be wholly payable in cash and is to be funded from Dechra’s existing debt facilities.
Under the Croatian Takeover Rules, the conditional offer to acquire Mr. Hanžeković’s shares requires Dechra to make a mandatory offer for the remaining issued share capital of Genera. The move is conditional on shareholder approval.
Genera is the oldest and largest manufacturer of animal health products in Croatia with a strong market share in its local market and neighbouring countries. It operates three main divisions: Animal Health, which represents the majority of revenue, Agrochemicals and Human Pharmaceuticals. Over the last few years, vaccines have become a key part of the Animal Health Division. The business has invested significantly in building its poultry vaccines capabilities, including regulatory submissions in the EU and elsewhere.
In its financial year ended December 31, 2014 Genera reported revenues of £20m (€28.4m).
Vaccine is the fastest growing segment in the animal health market as focus shifts towards preventative medicines. The market for poultry vaccines was $1.3bn in 2013, representing 22% of the vaccine market, and is projected to grow significantly.
This market growth is driven by the increased demand for protein and the shift from treatment through antibiotics to prevention. Dechra said there were high barriers to entry to the vaccine market as the development and production processes are highly technical and specialised.
It therefore said the acquisition represented a unique opportunity for Dechra to enter the vaccine market and expand its Food producing Animal Product (FAP) portfolio.
It said a broader product offering would enhance the group’s ability to expand its presence in emerging markets. Genera is in the process of obtaining registration in Europe for the most commonly used vaccines in broilers, which would support and improve Dechra’s FAP sales in Western Europe.
In addition, the acquisition would bring to Dechra three new sales territories and also enhance its manufacturing capabilities through access to know-how and a lower cost manufacturing base. The transaction is expected to be earnings neutral in the first two years of ownership and earnings enhancing thereafter.
Ian Page, Dechra CEO, said: “This is a very positive step for both Dechra and Genera. We have known the company a long time and are keen to work with the experienced Genera team to build the business. We believe this opportunity represents an attractive entry strategy to the poultry vaccine market with the potential to explore vaccines for other species in the longer term.
“In line with our strategy, this acquisition will accelerate our geographic expansion as well as broaden our FAP portfolio. Although the transaction is expected to be earnings neutral in the first two years of ownership, it offers great opportunities for our longer term ambitions.”
Subject to clearance by the Croatian authorities, the offer is expected to be launched in September and complete by November 2015.
