Johannesburg - Ascendis Health shares yesterday rose 11.01 percent to close trade at R24.80 on the news that the listed health and care brands company planned to acquire two major European health and care businesses, Remedica Holdings and Scitec International, for a combined R7.3 billion.
Ascendis will acquire Remedica, a generic pharmaceutical manufacturer based in Cyprus, and Scitec International, a leading European sports nutrition company, for R4.4bn and R2.9bn, respectively.
Read: Ascendis spends R7.3bn on international deals
The transactions are in line with the company’s acquisitive growth strategy and give Ascendis a hedge against a weakening rand.
After the acquisitions, half of Ascendis’ sales would be generated by foreign operations, Ascendis said.
The company has previously said that it wants at least 30 percent of its sales to come from hard currency-based sales.
Ascendis chief executive Karsten Wellner said yesterday that the company needed a hedge against imported inflation. He said the acquisitions cushioned the company against its biggest risk – rand volatility. “They derisk us and make us more stable.”
Global expansion
Wellner said the company’s strategy was to complement growth in the domestic health and care market through international expansion and by acquiring established businesses offshore.
“These acquisitions in the EU will be game changing for Ascendis and position us as an international health and care business of scale, offering an excellent rand hedge for our South African-based business,” the chief executive said.
The acquisitions would increase Ascendis’ earnings per share by more than 50 percent, the company said.
Remedica supplies more than 300 generic pharmaceutical products to 100 countries, primarily in emerging markets including the Middle East, Asia, Africa and South America. “Remedica has been growing nicely in developing economies,” Wellner said.
It supplies essential medicines, such as malaria treatment and antibiotics, to global NGOs, such as the World Health Organisation, Médecins Sans Frontières and the International Red Cross.
Wellner said Remedica would transform Ascendis’ Pharma-Med division into an international pharma player.
“The business creates a strategic platform for international expansion and growth in the generic pharmaceutical industry in both Europe and emerging markets. The manufacturing facilities can also be used by our other recently acquired pharma businesses Akacia Healthcare, in South Africa, and Farmalider, in Spain,” he said.
Scitec Nutrition, on the other hand, had presence in major markets such as Germany, France, Spain, Italy, Hungary and Poland.
Wellner said Scitec Nutrition’s acquisition complemented Ascendis’ global strategy because it provided a platform for international expansion in the sports nutrition and wellness industry.
“We will have the opportunity to accelerate the offshore expansion of the Ascendis sport nutrition brands, Evox and SSN, and will look to grow Scitec’s sales in Africa. The acquisition also provides the opportunity to extract synergies in research and development, production and the procurement of whey protein.”
Commenting on Ascendis’ post-acquisition plans, Wellner said the company would later appoint someone to oversee the activities of Ascendis’ European businesses.
He alluded to an appointment similar to that of Cliff Sampson, the former managing director of Foodcorp, who is now managing director of Ascendis Health, responsible for the day-to-day activities of its divisions in South Africa.
He said the company was still on the lookout for a major phyto-vet acquisition.
Ascendis’ phyto-Vet division is focused on animal and plant health. He said the company was also eyeing acquisitions in Australia, where there were “potential targets”.
Commenting on the possibility of Ascendis being an acquisition target itself, Wellner said that the company’s 43 percent shareholder, investment company Coast2Coast was unlikely to sell.
“At the end of the day, it is the shareholders’ call, but I know that they have huge belief in our growth.”
Samuel Simpson, an analyst at 36ONE Asset Management, said: “The deals will nearly double the size of the company and I believe management will focus on integrating the acquisitions and perhaps make a few bolt-on-acquisitions. But I don’t see any large-scale deals taking place in the near future.”
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