Grifols to Acquire Novartis Transfusion Dx
News Nov 11, 2013
The transaction is part of Grifols’ growth strategy of complementing its range of plasma protein therapies with other diagnostic products and services (Diagnostic Division).
Grifols will expand its portfolio by including Novartis’ diagnostic products for transfusion medicine and immunology, including its highly innovative, market-leading NAT technology (Nucleic Acid Amplification Techniques), instrumentation and equipment for blood screening, specific software and reagents. The assets acquired include patents, brands, licenses and royalties, together with the production plant at Emeryville (California, United States) and commercial offices in United States, Switzerland and Hong Kong (for the Asia-Pacific region) among others.
This strategic operation will strengthen Grifols’ Diagnostic Division, particularly in United States with a very strong and specialized commercial organization. It alsodiversifies Grifols’ business by promoting an activity area that complements the Bioscience Division (plasma proteins). Novartis’ diagnostic business, which focuses on guaranteeing the safety of blood donations for transfusion or to be used in the plasma fractionating industry, 2 complements and extends Grifols’ existing product range. Grifols will become a vertically integrated company able to provide solutions for blood and plasma donor centers, with the most complete product portfolio in the immunohematology field: gel cards, multicard and the new genotyping technology from Progenika.
Grifols will also benefit from the creation of a more efficient platform to market a wider range of diagnostic products and services in the United States and other countries, and will also optimize its after-sales resources.
According to Victor Grifols, President and CEO of Grifols: “The acquisition of Novartis’ diagnostic business is a step further into our vision to become a world leader also in the diagnostics field. To achieve this we knew we needed a significant presence in United States. We initiated the process in the Bioscience area in 2003 with the acquisition of the ATC assets and continued with the Talecris transaction in 2011. During the last two years the Diagnostic Division has been preparing for this step, especially in the immunohematolgyactivities”
FINANCIAL DETAILS AND CLOSING CONDITIONS
Grifols will acquire Novartis’ transfusion diagnostics unit for US$1,675 million (€1,240 million). The transaction will be structured through Grifols’ Diagnostic Division and a newly created 100% Grifols-owned subsidiary.
Grifols estimates pro-forma total annual revenues to approach US$1.0 billion (€740 million) (including royalties) for its Diagnostic Division after the closing of the operation.
As a result, the Diagnostic Division of Grifols would represent more than 20% of the group’s total income, compared to the current 4%, and the company would accelerate its implementation of a new growth strategy based on promoting complementary activity areas. As former Novartis employees are to be retained, the transaction will also increase Grifols’ workforce by approximately 550 employees.
The transaction´s financing is fully underwritten. A bridge loan for US$1.5 billion, has been fully subscribed in equal parts by Nomura, BBVA and Morgan Stanley. The loan agreement does not include any financial restrictions with respect to Grifols’ dividends policy or investments. The acquisition has been unanimously approved by the board of directors of both companies.
This acquisition will moderately increase leverage, which will be quickly absorbed by resilient cash flow generation.
Grifols’ net financial debt at the end of the third quarter of 2013 stood at €2.4 billion, a successful deleverage track record from the Talecris acquisition. This reflects strong results during the course of the year and positive cash flows. As a result, the debt ratio fell to 2.6 times adjusted1 EBITDA at the end of the third quarter.
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