UCB to Sell U.S. Generic Unit to Advent, Avista CapitalOliver Staley and David Risser
UCB SA agreed to sell its U.S. generic-drug unit to Advent International and Avista Capital Partners for $1.53 billion, causing the stock to dip as the company pushed back a profitability goal.
UCB, Belgium’s biggest drugmaker, will use cash from the sale of Kremers Urban Pharmaceuticals Inc. to the private-equity firms in order to invest in development of new medicines and cut debt, the Brussels-based company said in a statement today. UCB moved a target for achieving a 30 percent profit margin to 2018 from 2017, based on adjusted earnings before interest, taxes, depreciation and amortization.
The Kremers unit is more profitable than UCB as a whole, Jan De Kerpel, an analyst at KBC Securities in Brussels, wrote in a note to investors as he maintained a hold recommendation on the shares. The U.S. generics business has a profit margin of about 43 percent of revenue, De Kerpel said. That compares with the company’s margin last year of 22.3 percent.
The sale reflects UCB’s confidence in its pipeline of medicines, and gives the company flexibility to make larger acquisitions, Chief Financial Officer Detlef Thielgen said on a conference call. A purchase would be more welcome in the area of central nervous-system afflictions than in immunology, he said.
UCB fell as much as 4.1 percent, the most in four weeks in intraday trading. The stock was down 2.4 percent at 63.95 euros as of 4:27 p.m. in Brussels, paring its gain this year to 18 percent.
Chief Executive Officer Roch Doliveux, who is stepping down in January, has spent the past decade shifting UCB’s focus away from chemicals and films while increasing development of drugs for severe diseases. He integrated Celltech Group Ltd., bringing the Cimzia rheumatoid arthritis treatment to UCB, and in 2006 acquired German drugmaker Schwarz Pharma to add neurological treatments and Kremers.
“This is another step for UCB to enhance focus on our core business in neurology and immunology,” Doliveux said in today’s statement. The medicines sold by Kremers include a drug for attention deficit hyperactivity disorder that recorded 79 million euros ($98.2 million) in sales in 2013.
“Now was a logical and opportune time to dispose of this non-core business,” Peter Welford, an analyst at Jefferies International Ltd., said in a report. The sale price exceeded his $1.2 billion to $1.4 billion prediction.
The transaction is expected to be completed by the first quarter of next year, UCB said. Lazard Ltd. is acting as lead financial adviser to UCB, BNP Paribas SA is acting as an additional financial adviser and Covington & Burling LLP provided legal advice. Jefferies Group LLC, Credit Suisse Group AG, Morgan Stanley and Goldman Sachs Group Inc. advised Advent and Avista.
UCB said in February that Jean-Christophe Tellier, head of its biopharmaceutical brands, will take over as CEO at the start of 2015.
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