March 24, 2009 / 3:50 PM / 10 years ago

DEALTALK-Tycoon may have to swallow modest price for Actavis

(For more Reuters DealTalks, click [DEALTALK/])

* Generic rivals, sovereign wealth still in auction -sources

* Sanofi interested in parts but not whole business -sources

* Analysts point to tough generics market

By Quentin Webb

LONDON, March 24 (Reuters) - Iceland’s richest man, Bjorgolfur Thor Bjorgolfsson, may have to swallow a modest price for Actavis, his globe-spanning copycat drugs business, or allow choosy bidders to cherry-pick some of its best assets.

Bjorgolfsson’s investment vehicle Novator, which bought Actavis in 2007, put the debt-laden company up for sale in January, hoping to get as much as 7.5 billion euros ($10.2 billion). The auction entered a second round earlier this month.

But people familiar with the matter say a limited number of bidders remain interested in Actavis, one of the world’s 10 biggest makers of generic drugs.

And analysts warn a steep decline in the value of listed rivals, and pressure on profit margins across the sector, could also weigh on the sale of Bjorgolfsson’s biggest investment.

Some acquirers may be more interested in German rival Ratiopharm, previously owned by the late Adolf Merckle, which will be put up for sale next month. [ID:nLN364503]

“It will be very tricky to fetch a good price because there’s few buyers and a number of assets up for sale,” WestLB analyst Andreas Theisen told Reuters.

Theisen said a sale price of 10 times earnings before interest, tax, depreciation and amortisation (EBITDA) would be “reasonable” in the current climate — at the bottom of the 10 to 15 times EBITDA Actavis has been seeking.

That valuation range implies a sale value of 5 billion euros-plus, given Actavis is expected to generate about 500 million euros of recurring EBITDA in 2009.

Similarly, Natixis Securities analyst Beatrice Muzard, who in January estimated that Actavis could fetch 7 billion euros, now says 5 billion is more likely, pointing to listed rival Stada Arzneimittel AG STAGn.DE, whose shares have fallen more than 40 percent this year.

Profit margins are under pressure in major markets such as Germany and the United States, Muzard said, while lower consumer spending and big currency moves are diminishing the appeal of once-hot emerging markets in central and eastern Europe.


Among big pharmaceutical companies, France’s Sanofi-Aventis (SASY.PA) was seen as one of Actavis’s few natural suitors. But three people familiar with the matter said Sanofi was not interested in acquiring all of Actavis, although it could still offer to acquire parts of the business outside the United States.

Actavis operates in about 40 countries in Europe, the United States and Asia. For a buyer such as Sanofi some of those locations could provide a useful springboard from which to later market or produce patented drugs.

That only leaves rivals in the smaller world of generic drugs, and some sovereign wealth funds (SWFs) based in the Middle East and Far East, as potential bidders for the whole business when binding bids are sought in the coming weeks, two of those people said.

However, the top U.S. executive of Teva (TEVA.TA), the world’s biggest generic drugmaker, has said it was unlikely to make a big acquisition soon. The chief executive of Novartis NOVN.VX, the parent of Teva’s biggest rival Sandoz, has said the Swiss group is not interested in Actavis.

Among sovereign wealth funds, some including Temasek and GIC in Singapore and the Abu Dhabi Investment Authority (ADIA) already hold stakes in drug companies, but it is a big step from a stakeholding to owning a multibillion-euro drugmaker outright.

The sale of Actavis will be also be followed keenly at Deutsche Bank. It was left holding 4 billion euros of debt backing the 2007 buyout — its biggest block of unsold leveraged loans.

Bjorgolfsson, Iceland’s only billionaire, has been hit hard by the financial crisis, with his wealth slipping to $1 billion from an estimated $3.5 billion two years ago, according to Forbes magazine. He lost money after October’s collapse of Iceland’s Landsbanki bank, in which he was a major shareholder.

Bank of America Merrill Lynch is handling the sale.

Actavis, Novator and Sanofi declined to comment.

Editing by David Cowell

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