Aspen saw its share price plunge 17.43 percent to R225, shedding R47.50. Photo: Bloomberg

JOHANNESBURG – Africa’s largest drugmaker, Aspen, yesterday lost nearly R25 billion of its market capitalisation as investors issued a stinging rebuke of the group’s €740 million (R12.8bn) sale of its nutrition unit to French-based Lactalis.

Some market pundits deemed the price undervalued the business. The group saw its share price plunge 17.43 percent to R225, shedding R47.50. 

“We still have to look but the price for infant business could be lower,” said Wayne McCurrie from FNB Wealth and Investments as he tried to explain the plunge.

Market expectations were that the group would fetch $1 billion to $1.5bn for the unit. 

The group said the disposal of its nutrition business, with brands such as Infacare, was to focus on its pharmaceutical businesses, which it expects to drive increased business efficiency and performance.

Aspen deputy chief executive Gus Attridge said the group had negotiated a good price for the business.

“The multiple received for the nutritionals business is significantly greater than the group multiple and also represents more than three times the original purchase price of the businesses. Our view, therefore, is that the value is very fair,” Attridge said.

Aspen said it expected the transaction to be sealed in the next six months. 

Attridge said the proceeds from the sale would be reduced by e62m, which would be utilised to buy out Aspen’s joint venture partners in New Zealand and China.

The group had in January said it would be conducting a review of its global nutritionals business, with a view to entering into a strategic partnership or possibly a sale. Aspen in 2013 acquired Nestlé SA’s infant nutrition businesses, which distributes a portfolio of infant nutrition products in Australia and certain southern African countries for $215m.

The group said its nutritional arm contributed R3bn to group revenue in the year ended June, while it contributed R512m to group segmental contribution profit for the year under review. Reports in the lead-up to the announcement had pegged the purchase price at $1bn. 

Lactalis said the acquisition would accelerate the group’s development on the global nutrition market. “With two strong brands, Alula and Infacare, covering three zones – Latin America, Sub-Saharan Africa and Australia/Asia – Lactalis will strengthen its presence in those countries." 

Aspen reported an increase of 3 percent to R42bn in the year ended June. Its headline earnings per share increased 13 percent to 1468.8 cents.