DCC to pay €71.2m for UK maker of generic medicines
Company hopes to lead market with Kent Pharma purchase
Distribution group DCC is spending €71.2m to buy a UK maker of generic pharmaceuticals with a manufacturing site in Ireland.
DCC said it intended to pay €71.2m for Kent Pharma, which develops, manufactures, distributes and sells generic pharmaceuticals for British, Irish and international markets.
Kent's primary focus is on so-called beta lactam antibiotics, including penicillin V, flucloxacillin and amoxicillin, which are typically used to treat infections related to throat, ear, and respiratory tract ailments. It supplies the UK with more than 60pc of the total penicillin antibiotics sold there.
The firm has a manufacturing facility for the products in Roscommon, Athlone Pharmaceuticals, which it acquired in 1992. There are 126 people employed at that site. Kent employs 304 people in total, including a regulatory and portfolio development team of 37.
Kent primarily sells into the retail pharmacy channel and also to hospitals, other generic pharmaceutical companies and international distributors.
The firm – which was founded by Denis O'Neill and Mike Overy in 1986 – generated sales of €90m and an adjusted operating profit of €9.3m in the 12 months to the end of August. Its adjusted earnings before interest, tax, depreciation and amortisation were €10.7m in the period.
DCC said it would pay €68.1m in cash. Deferred consideration of up to €6.7m may be payable based on the performance of the business over the next three years.
DCC chief executive Tommy Breen described the acquisition as a "material step forward" for the group's healthcare division and said Kent was an "excellent strategic fit".
He added that "for some time" DCC had believed there was an opportunity to build a substantial pharma business principally focused on established, niche generic products.
The company said that Kent would be combined with its existing pharma activities to create a business with annual revenues approaching €150m and commanding a "leading position" in the British generics market.
The acquisition is expected to be completed in early 2013, subject to approval from the Irish Competition Authority.
DCC, which distributes products from home heating oil to games consoles, has been active in the pharmaceutical market since 2002.
It sells generic pharmaceutical products throughout Ireland and Britain through hospitals, pharmacies and homecare channels. In 2011, it acquired UK-based generic pharma firm Neolab for €9m.
"Furthermore, the combined business will provide a strong platform for further product in-licensing and bolt on acquisition opportunities," it added.
Davy Stockbrokers analyst Joshua Goldman said the acquisition should help DCC leverage its existing pharmaceutical licences to expand its geographic footprint in the medium term.