What: Fast-growing generic drug manufacturer Mayne Pharma Group Ltd (ASX: MYX) has announced an agreement to acquire a portfolio of 37 US Food and Drug Administration (FDA) approved and 5 FDA filed products from Teva Pharmaceutical Industries in a US$652 million deal.
So What: The pricing of the acquisition represents a multiple of under six times the projected earnings before interest, tax, depreciation and amortisation (EBITDA).
To fund the acquisition, Mayne Pharma is undertaking a $287 million placement and has extended its debt facility, while launching a fully underwritten $601 million 1-for-1.725 accelerated non-renounceable entitlement offer.
Now What: Mayne Pharma’s share price has run hard over the past few years with the stock up 50% in 12 months and nearly 200% in five years.
This latest deal will see the group’s market capitalisation grow to around $2 billion. That’s still much smaller than the near $50 billion capitalisation of CSL Limited (ASX: CSL). However investors who follow CSL will understand the appealing economics of a successful pharmaceutical company.
According to Mayne Pharma’s announcement:
- the acquired portfolio is expected to contribute sales of US$237 million in FY 2017 with gross margins greater than 50%
- and the acquisition is expected to be significantly accretive to reported and cash earnings per share (pre synergies) in FY 2017
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