By Tosin Sulaiman and Tiisetso Motsoeneng
JOHANNESBURG, June 27 South Africa's Aspen
Pharmacare said on Thursday it would acquire drugs and
a manufacturing business from U.S. drugmaker Merck in a
$1 billion deal to bolster its presence in Europe, Latin America
Africa's biggest maker of generic drugs has been on an
aggressive acquisition trail this year that has broadened its
offering of medicine in fast-growing regions such as Latin
America and southeast Asia and lifted its share price.
Aspen last week said it was in talks to buy thrombosis drugs
and a French factory from GlaxoSmithKline in a deal also
likely to be worth $1 billion. It paid $215 million to Nestle SA
in April for rights to infant formula in southern
Africa and Australia.
Analysts do not expect the Merck deal to derail the purchase
"The (Merck) deal is quite good for their expansion plan,"
said Sibonginkosi Nyanga, an analyst at brokerage Imara S.P.
Reid. "They have been buying assets almost the world over. Their
business is almost no longer a South African business. It's now
a well diversified operation."
Shares of Aspen, which are up nearly 70 over the last 12
months and six-fold since 2008, rallied on news of the latest
acquisition, adding almost 6 percent versus a 0.37 percent rise
in Johannesburg's benchmark Top-40 index.
Aspen said in a statement it would buy a portfolio of 11
drugs - including hormone replacement therapy, oral
contraceptives and an anti-coagulant - from Merck and a
manufacturing business in the Netherlands that also has a U.S.
The drugs recorded revenue of $248 million in the financial
year ended December 31, 2012, with more than half of that from
Latin America and Asia Pacific.
It said it will largely fund the acquisition with new debt,
which could be a seen as a negative.
Aspen already had 10.4 billion rand ($1.03 billion) in debt
on its balance sheet at the end of December and its debt to
equity ratio currently stands at a hefty 75 percent, according
to Thomson Reuters data, well above the average of 27 percent
for two of its local rivals.
Deputy CEO Gus Attridge told Reuters the borrowing was
"We are very cautious about being overextended from a debt
perspective and clearly the completion of this transaction and
the GSK transaction would increase the amount of debt... but we
are comfortable that we will pay it down in time," he said.
Nyanga said Aspen's track record of cash generation and its
ability to pay back its debt puts the company on a solid
"With their ability to generate cash I think they're able to
service that kind of debt."