Charterhouse begins groundwork for $700 million-plus Doc Generici sale -sources

By Pamela Barbaglia

LONDON (Reuters) – European buyout firm Charterhouse [CHCAP.UL] is preparing for the sale of its Italian generic drugs business Doc Generici and has contacted investment banks to select an adviser, two sources familiar with the matter said.

The Milan-based supplier of cardiovascular, cancer and other drugs could be valued at between 650 million euros ($704 million) and 700 million euros, the sources said.

The sale is expected to whet the appetite of private equity investors, some of which have already come forward and expressed their interest in taking over the business in a so-called secondary buyout, the sources added.

Charterhouse declined to comment.

Reuters exclusively reported on Dec. 2 that Charterhouse was considering selling the business and that buyout funds Blackstone <BX.N> and CVC [CVC.UL] were among a number of investment firms looking to take part in any auction.

Led by Chief Executive Gualtiero Pasquarelli, Doc Generici ranks as one the leading suppliers of cheap generic drugs in Italy and competes with international players such as Teva <TEVA.TA> and Sandoz, part of Swiss drugmaker Novartis <NOVN.VX>.

In December it hired London-based L.E.K. Consulting to provide strategic advice ahead of a possible sale.

The supplier of the cheaper generic version of Pfizer’s <PFE.N> Viagra expects 2015 earnings before interest, tax, depreciation and amortisation (EBITDA) to have exceeded 60 million euros, the sources said.

Charterhouse has grown the company’s core earnings by more than 35 percent since it took control in 2013.

The London-based private equity house wants to cash out before a new wave of patent expirations takes place in Italy in 2017, hoping to take advantage of strong growth prospects for cut-price medicines in the world’s eighth-biggest pharmaceuticals market.

Italy has been slow to adopt generic medicines. Overall, generic drugs account for only about 20 percent of the market in Italy, well below the European average. In countries such as Britain, Germany and the Netherlands, generics make up between two thirds and three quarters of the market.

That creates an opportunity for generics makers in Italy as the government seeks to stimulate greater uptake of cheaper treatments as a way to keep a lid on rising medical bills.

($1 = 0.9236 euros)

(Editing by David Goodman)

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