Stada Says Strength of Russian Unit May Attract Bids

Stada Arzneimittel AG, the German generic-drug maker that spent more than 250 million euros ($331 million) on acquisitions last year, said it expects to draw takeover offers from rivals seeking to expand in Europe.

“In Europe, we have a sweet spot in Russia” and “we are doing a very good job” in businesses including consumer health care, Markus Metzger, the Bad Vilbel, Germany-based company’s director of investor relations, said yesterday at the JPMorgan Chase & Co. health-care conference in San Francisco. Companies that don’t have those businesses in Europe “may look at buying us,” he said.

Stada may be a target of Sun Pharmaceutical Industries Ltd., India’s largest drugmaker by market value, which was considering acquisitions in Europe, including the German drugmaker, people familiar with the matter said in August. Sun, maker of generic Flomax and Plavix, seeks to add products and extend its geographical reach, Chairman Israel Makov said in a Dec. 31 interview.

Metzger declined to comment specifically on Sun’s potential interest or on other possible acquirers.

“It’s finally a matter of price,” Metzger said during a question-and-answer session at the conference. “It’s not in our hands, we have a 100 percent free float,” he said.

Company Value

Stada would be worth about 3.7 billion euros, based on the 10.3 times earnings before interest, tax, depreciation and amortization median price of eight generic drugmaker acquisitions over the past three years, according to data compiled by Bloomberg. The drugmaker probably had EBITDA of 357 million euros in the year ended Dec. 31, based on the average of 22 analyst estimates gathered by Bloomberg.

Stada rose 0.7 percent to close at 25.79 euros in Frankfurt trading, giving the company a market value of 1.5 billion euros.

Stada’s share price is “depressed” partly because of the European debt crisis and past writedowns on its Serbian business, Metzger said.

“We are still looking cheap,” Metzger said. “We had some negatives. Credibility is slowly coming back. We are more stabilized in Serbia right now.”

Metzger declined to specify a target price for the company and said it was “up to investment bankers” to gauge the value.

“If anyone pays 50 euros, it’s going to be difficult to say no,” he said, referring to a per-share price.

Serbian Writedown

Stada would also consider merging with a similar-sized branded or biotechnology drugmaker, Chief Executive Officer Hartmut Retzlaff said in October 2011. The acquisition of the similar-sized competitors Ratiopharm GmbH and Actavis Group hf have widened the gap between Stada and generic-drug industry leaders.

Stada bought Serbia’s Hemofarm Koncern AD in 2006 for 480 million euros, its biggest acquisition and part of a push to shift manufacturing capacity as well as sales into eastern Europe. It took a 96.9 million-euro writedown before taxes in the third quarter of 2011 for unpaid bills there.

The company is proceeding with its expansion and is on track to meet its 2014 targets, Metzger told investors yesterday at the conference. It could spend as much as 150 million euros in 2013 for smaller deals to grow in areas such as consumer health care, he said.

“Our financial flexibility is somewhat limited, but on a smaller scale we are still looking out for good opportunities in OTC and maybe for joint ventures in some of the emerging markets,” he said.

Stada would like to expand in countries such as Mexico, Argentina and is “looking at opportunities in China, Thailand and other Asian countries,” Metzger said.

“It’s also very tempting to add new products to our Russian platform,” he said.

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