Matrix Labs acquires Belgian drug firm Docpharma for $263 m

This could be considered the largest ever foreign acquisition by an Indian pharma company, as the deal is more than three times the $85 million paid by Ranbaxy Laboratories in early-2004 to acquire RPG Aventis SA, the France-based generic arm of Aventis.

The agreement is scheduled to close by July 8, after which Matrix will acquire control over Docpharma. Matrix and will follow it up with an open offer to the Docpharma shareholders for the remaining 78 per cent stock at the same price in accordance with Belgian takeover regulations.

According to N Prasad, chairman and CEO, MLL, the price of euro 34 per share represented a premium of 19.3 per cent on the average Docpharma share price in the last one month and a premium of 13.3 per cent on the last trading price on June 17, 2005.

Prasad said the value of the transaction amounts to $263-million (Rs1,144 crore). After accounting for Docpharma's net cash position and its own shares held by the Docpharma group, the enterprise value amounted to $238-million (Rs1,036 crore).

Prasad told mediapersons that once the acquisition was completed, two-thirds of the combined entity's revenues would be generated in the regulated markets, with half of the total revenues coming from Europe alone.

Matrix would retain Docpharma's brands and a trade names in the latter's markets. Also Docpharma's founder Leon Van Rompay and Stijn Van Rompay would remain CEO and COO of the company respectively for at least five years.

Matrix has the option to convert 65 per cent of Rompays equity into company shares. Leon Van Rompay and family have also agreed to a deferred payment for 65 per cent of their consideration amounting to $25 million.

Prasad said Matrix borrowed $160 million to finance the transaction after taking into account its internal accruals of $35 million, Docpharma's net cash position of an additional $35 million and deferred payment of $25.02 million.

Docpharma has around 130 registered dossiers in the EU market, currently sells 50 registered market products in Europe and plans to launch over 80 products in the next 24 months in its key countries — Belgium, Luxemburg, France, Italy and Netherlands.

Prasad said the acquisition would integrate Matrix's manufacturing capacity with Docpharma's strong marketing and distribution platform in key growing markets within southern Europe, making it one of the select few generic pharmaceutical companies that have the abilities to compete on the basis of cost advantage as well as marketing differentiation. Docpharma and Matrix's operations being complementary with very limited overlap in their respective businesses.

According to Stijn Van Rompay, the chief operating officer, Docpharma, "This is an important step in the development of Docpharma. The combination with Matrix will create a vertically integrated player that will give Docpharma significant economies of scale and improvements in terms of product sourcing, product development and production cost," he said.

Prasad said, "This acquisition allows us to gain direct access into the under-represented, high growth generic pharmaceutical markets of Belgium and Southern Europe."

Matrix Labs had announced plans to acquire Strides Arcolab to emerge as the ninth largest Indian pharmaceutical company.

The latest acquisition would enable the Matrix-Docpharma combine to leapfrog into the premier league of top-five Indian pharma majors.