Aspen Pharmacare Holdings Ltd., the Southern Hemisphere’s largest generic drugmaker, agreed to buy 25 pharmaceutical brands from its partner GlaxoSmithKline (NYSE: GSK) to bolster an Australian expansion.
Aspen will pay $268 million for labels including Amoxil, Kapanol, Zantac and Lamactil, the Johannesburg-based manufacturer said in a statement today. The purchase will be funded from new offshore debt facilities and will boost earnings in the year ending June 2013, it said.
GSK expects to make a profit of some $50 million on the sale.
“Whenever we can, we tend to use debt to fund deals as Aspen is very cash generative, so it doesn’t make sense to issue equity,” Chief Executive Officer Stephen Saad said in an interview in Johannesburg. “Over time we can eliminate debt.” The company has secured an interest rate of 5 percent to 6 percent, he said.
Aspen, which supplies medicines in more than 100 countries, is looking to increase business in Asia Pacific, Latin America and sub-Saharan Africa, Saad said March 7.
The transaction with London-based GlaxoSmithKline adds a range of antibiotic and anti-viral medicines as well as painkillers, muscle relaxants and treatments for nausea and inflammation.
GSK pointed to the sale as part of a strategy to tighten its focus.
“As with the divestment of its non-core over-the-counter (OTC) brands earlier in 2012, today’s announcement is an example of GSK’s commitment to realise value and enhance returns to shareholders through the sale of low growth or non-core businesses and to focus on priority brands, products and pipeline opportunities that have long term growth potential,” GSK said in a statement.
The South African drugmaker completed the purchase last year of Melbourne-based Sigma Pharmaceuticals, which allowed Aspen to introduce its generic and over-the-counter products in Australia and expand into countries including Japan, Taiwan, Thailand and the Philippines.
“We already issue one in seven scripts in Australia and so this deal means we can promote these brands without many additional overhead costs,” Saad said. Aspen can take brands that haven’t received attention from the previous owner, “give them some care and make them work.”
GlaxoSmithKline, the U.K.’s largest drugmaker, owns 18.6 percent of Aspen. BDO Corporate Finance (Pty) Ltd. found the transaction between the companies to be fair to Aspen shareholders, the South African company said.
GSK operates its U.S. headquarters in Research Triangle Park, N.C.
(Bloomberg news contributed to this report.)
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