Aspen shares rise on sale of its Japanese business
Aspen said it entered into an agreement to sell the business through its wholly owned subsidiary, Aspen Global Incorporated, to Sandoz, a multinational pharmaceutical company and leader in generic medicines.
The group also entered into a five-year manufacturing and supply agreement with Sandoz, with an additional two-year extension option for the supply of active pharmaceutical ingredients, semi-finished and finished products related to the portfolio of divested brands effective at the completion of the transaction.
Aspen said the transaction would consist of upfront cash consideration of €300m and a deferred consideration of €100m contingent upon achieving certain supply criteria and licensing opportunities.
“The transaction is consistent with the group’s strategic intent to focus on its core pharmaceuticals business in markets where it has sufficient scale and where there is alignment between its business model and the relevant market dynamics,” Aspen said.
Aspen shares closed 3.98 percent higher at R117.70 on the JSE yesterday, following the news of the sale, from Friday’s close of R113.20.
The group had been bullish in the past three months, gaining more than 75 percent, after it offloaded its nutritionals business to French company Lactalis Group. The sale resulted in a net cash inflow of €635m.
Jordan Weir, a trader at Citadel, said the eventual sale of Aspen’s non-core assets was generally expected by the market. “But, although Aspen’s share price has risen some 75 percent in the last three months, the company is still grappling with a very serious debt situation,” Weir said. “Strategic corrective steps and the potential sale of further non-core assets are still being rolled out in order to address the company’s material debt burden.”
Weir said the official sale of its Japanese business to Sandoz, which will only be finalised upon being cleared by the Japanese Fair Trade Commission in the first half of 2020, would move Aspen a significant step closer to sorting out its debt woes.
Aspen reduced its net debt from about R53bn at the end of December last year to R40bn by the end of June following the sale of the business.
Nesan Nair, a senior portfolio manager at Sasfin Securities, said the reason for Aspen’s share price capitulation earlier was the heavy debt burden without sufficient earnings.