The healthcare sector has witnessed some big deals this year, with pharmaceutical companies receiving special attention from private equity firms. Another big deal was announced on Monday, when European private equity fund CVC and Singaporean sovereign wealth fund Temasek announced the purchase of a controlling stake in Alvogen.
The Transaction Details
Robert Wessman, the former chief executive officer of Actavis, founded the generic drugs company in 2009. Wessman had previously sold a stake to another private equity firm, as Pamplona bought a small stake in 2014.
The US-based investment group Vatera Healthcare Partners also has a stake in the company. In the latest deal, CVC and Temasek are thought to have a gained majority control, although finer details are still unknown.
According to the Reuters report, the deal will see Alvogen valued at $2 billion. This would be around 11 to 12 times company’s earnings before interest, tax, depreciation and amortisation.
Wessman, together with Pamplona, will continue to hold a stake in the company. Wessman was quoted in Reuters saying, “We want to be a company that can build up one of the leading positions in Asia Pacific, and on a global level we expect to be among the leading companies in a few years from now.”
Alvogen is hoping the deal will help it become one of the top ten companies in the industry within the next five years.
Furthermore, Thomas Ekman, partner at CVC, said in the official press release, “Together with our co-investors, we are delighted to be working with Robert and his team to continue Alvogen’s extraordinary expansion.”
Increasing Deal Numbers
The deal is yet another big deal in the healthcare sector. According to data by Thomson Reuters, the sector has already seen over $250 billion worth of mergers and acquisitions this year. This is almost a two-third increase for levels last year.
One of the reasons for the increasing deal numbers, especially among the pharmaceutical companies, is the tough competition within the industry. Generic drug companies are cutting operating costs through acquisitions in order to survive in the sector.
There are currently a number of talks on-going in the sector, with Israeli drug-maker Teva’s efforts to acquire its rival Mylan being one of the most notable examples.
Private equity firm CVC has been part of a number of deals this year. We previously mentioned its buyout of the German perfume company Douglas. The firm has also recently bought the theatre production company Stage.
Furthermore, the deal also marks another partnership between the private equity firm and the wealth fund. Temasek recently bought a stake in a chemicals group Evonik, which is controlled by the private equity firm.
The Financial Times quoted Enrico Soddu, an analyst at the Sovereign Wealth Center, saying, “They (Temasek) certainly have a working relationship with CVC and seem to trust the CVC investment team – and they probably are following the same themes as Temasek and vice versa.”
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