DURBAN - Ascendis Health shares fell by more than 19 percent on the JSE yesterday after the South African-based global health care company announced that it has terminated negotiations with the preferred bidder for the disposal of its subsidiary, Remedica.
The group cited the failure to agree on key terms for the transaction as the reason for terminating the negotiations.
Ascendis has been trading under a cautionary since January, when it first announced the possibility of the disposal of its Cyprus-based unit.
The group acquired the pharmaceutical manufacturer in 2016 for 260million (R4.18billion) and Europe’s leading sports nutrition company, Scitec, for 170m. The two acquisitions were expected to lift the group’s market capitalisation to R11bn, but instead the company has been facing mounting debt and weak earnings growth. Its market capitalisation was just above R1bn yesterday.
The share price declined to R2.26 a share, down from Friday’s closing price of R2.90, after the group announced the termination of the negotiations in the morning. However, it recovered in the afternoon to R2.50 before closing at R2.40.
Ascendis Health said it remained committed to deleveraging its balance sheet through the disposal of certain assets, including Remedica, at prices reflective of the underlying value of those assets, in order to safeguard shareholder value.
“Remedica, in particular, remains a high-quality business that is delivering a sizeable portion of the Ascendis Health group’s earnings growth and cash flow. As such, the company will continue to work towards disposing of Remedica at a price that is reflective of market value and yields a significant deleveraging of the Ascendis Health group’s balance sheet,” the group said.
The group said - as it had disclosed in its financial statements for the year to the end of June - that it had negotiated an interim stability agreement (ISA) with its lender consortium in May to allow the Remedica disposal to be completed.
“The lender consortium has agreed to further extend the ISA period during which period the company and lender consortium will seek to agree the terms of a more permanent restructuring of the existing debt facilities so as to allow the company to progress the disposal of Remedica and other non-core assets in the group in an orderly manner and maximise value for the group,” Ascendis said.