Dechra raises £184m to fund £175m takeover of US group

Dechra Pharmaceuticals, the Northwich-based vet products group, is to acquire US-based Piedmont Animal Health, for £175m in cash.

The group, headed by chief executive Ian Page, is meeting the cash payment through a placing which raised £180m through the issue of 5,247,813 new ordinary shares of one pence each, at a price of 3430p per share, an eight per cent discount on the closing price on July 20.

It represents approximately 4.8% of the company’s existing issued share capital.

Alongside the placing, Dechra raised £4m through an offer on the Primary Bid Platform aimed at its private and other investors.

Piedmont specialises in developing novel and differentiated products for the companion animal market and has a strong development track record.

Dechra said the placing will also provide balance sheet flexibility to execute on an active acquisition pipeline, including on one near term opportunity which the company is in exclusive discussions to acquire with an acquisition price similar to Piedmont.

Assuming completion of this potential acquisition, and after paying the purchase cost of Piedmont, Dechra expects its net debt to EBITDA to be approximately 1.8x as at December 31, 2022.

Both Piedmont and the potential acquisition represent compelling opportunities to deliver shareholder value and are closely aligned to Dechra’s strategic ambitions, it said.

Originally founded in 2001 in Greensboro, North Carolina, Piedmont has a long and successful track record of product development including major brands launched by multi-national animal health companies.

It employs a development team of 19 people, increasing Dechra’s scientific and regulatory capabilities.

Piedmont has eight novel products in various stages of development serving both the cat and dog markets.

The products are all within Dechra’s key therapeutic areas of competence.

The two lead development products are expected to launch in financial years 2024 and 2025 with an expected peak sales potential of at least $40m, in aggregate. Each of the products in the remainder of the portfolio are significant and are expected – if approved – to be well within Dechra’s top 20 products by sales, being greater than $10m, with one having a significantly higher potential.

The acquisition of Piedmont accelerates the provision of innovative solutions to veterinarians and pet owners in areas of unmet or under serviced medical needs.

Its novel pipeline is complementary to Dechra’s existing portfolio, providing the opportunity to significantly strengthen Dechra’s presence in key therapeutic areas of dermatology, pain management and anti-infectives.

While initial product registrations will be focused on the key North American and European markets, there is the opportunity over time to register products in international markets.

Earlier this month, on July 11, Dechra released a trading update for the financial year ended June 30, 2022, in which it stated the group’s strong trading performance had continued through the year and remains in line with expectations. There has been no change to outlook since this time.

On July 14, the company announced a refinancing of the group’s debt facilities through a debt private placement, issuing €50m seven year and €100m 10 year new senior unsecured notes.

The private placement was undertaken to achieve the group’s aim of ensuring diversified sources of funding and to extend its debt maturity profile. All proceeds from the placement have been used to repay existing debt on the group’s revolving credit facility.