Lupin sells Japanese business Kyowa for enterprise value of Rs 3,702.4 crore

Lupin, India’s third-largest drugmaker on November 11 said it has entered into a definitive agreement for the sale of its entire stake in its Japanese

subsidiary Kyowa Pharmaceutical Industry Co to Japan-based private equity firm Unison for an enterprise value of Rs 3,702.4 crore.

Lupin will get net proceeds of $300 million from the sale, which will be used to pare debt and invest in core markets of the US and India.

Under the terms of the agreement, Lupin’s subsidiary Nanomi B.V. will divest its entire stake (99.82 percent) in Kyowa to Unison’s entity Plutus for an enterprise value of JPY 57,361 million, subject to closing adjustments.

The deal is expected to be closed by the end of this financial year.

The divested business recorded revenues of Rs 1,786.4 crore in FY19, constituting 10.7 percent of the revenues from operations.

The proposed transaction values Kyowa at an enterprise value of Rs 3,702.4 crore and will generate post-tax net cash inflow of approximately Rs 21,039 million).

“The transaction is expected to be EPS accretive and will significantly strengthen the consolidated balance sheet of the company, Lupin said.

The post-transaction net debt of the company will stand at Rs 1,129 crore compared to Rs 4,361.8 crore as on September 30, 2019

Net debt to equity ratio will improve to 0.08 as compared to 0.32 as on September 30, 2019.

“The deal proceeds will be utilized to strengthen Lupin’s balance sheet as well as provide growth capital to support organic and inorganic initiatives for our focus markets,” said Vinita Gupta, CEO of Lupin.

“Driven by the incentives provided by the Japanese government to increase generic utilization and our R&D, manufacturing and commercial strengths, we grew the Kyowa business multifold in the last 12 years to emerge as the 5th largest generic company in Japan,” said Nilesh Gupta, Managing Director, Lupin.

Lupin bought Kyowa in 2007 for $60 million.

Gupta said they are exiting the Japanese business at 4-5 times of the initial investment.

Gupta said the company had to exit Japanese generics business, with commoditisation of oral solid generics business in Japan with the government there pushing annual price cuts, leading to steep erosion of prices and lower profit margins.

Lupin said it will now be confining itself to complex generics, biosimilars and specialty portfolio in Japan. The company recently launched biosimilar etanercept to treat psoriasis in tie-up with Japan’s Nichi-Iko.

Nomura International (Hong Kong) Limited is the sole financial advisor to Lupin for the proposed transaction.


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