(E) Pliva Gains U.S. Foothold with Sidmak Buy
Pliva Pharmaceutical, Chemical, Food and Cosmetic Industry
Pliva Gains U.S. Foothold with Sidmak Buy
Tue Jun 11, 5:54 AM ET
By Ben Hirschler, European Pharmaceuticals Correspondent
LONDON (Reuters) - Croatia's Pliva , eastern Europe's biggest drug firm, said on Tuesday it had agreed to buy U.S.-based Sidmak for $152.9 million in cash, giving it a platform in the world's largest pharmaceuticals market.
The company, which is listed in London, will also assume $59 million of bank debt with the takeover of Sidmak Laboratories Inc and its wholly-owned subsidiary Odyssey Pharmaceuticals Inc.
The East Hanover, New Jersey-based group makes branded and generic specialty medicines that will complement Pliva's own product range. The Sidmak companies reported an operating profit of $4.3 million on sales of $100.4 million in 2001.
Pliva's chief executive, Zeljko Covic, said the deal was a continuation of his company's strategy of expanding into new markets beyond its traditional stronghold in central and eastern Europe.
"This is a great opportunity for Pliva. It provides a platform for us to sell our own products on the U.S. market and gives enormous opportunities for exploiting synergies between the two companies, primarily in product development, manufacturing and cross-selling," he told Reuters.
The deal is Pliva's biggest to date but Covic said he was eying further acquisition opportunities in the European Union ( news - web sites) and Latin America.
Last year, the Zagreb-based firm bought German drugs firm AWD.pharma for 50 million euros ($47.30 million), adding a key plank to its EU platform following the purchase of Dominion Pharma in the UK in 2000.
Pliva will fund the latest U.S. deal through a $165 million financing facility provided by Citibank, secured against royalties from its top-selling antibiotic azithromycin, which is marketed as Zithromax by licensing partner Pfizer Inc .
As a result of the acquisition, Pliva said it expected percentage revenue growth for 2002 to be in the "mid 20s."
The deal is expected to dent operating margins in the short term but this will be offset by tax efficiencies. As a result, Pliva said it was raising its guidance for 2002 earnings per share growth to around 25 percent from 20 percent previously.
Bram Buring, industry analyst at Raiffeisenbank in Zagreb, said the acquisition would allow Pliva to push additional products into the all-important U.S. market without over-stretching the balance sheet.
"Pliva's cash-flow is healthy and I don't see a problem servicing debt. Gearing would roughly double by my estimates, to about 42 percent, which I would still consider manageable," he said.
Pliva global depository receipts, which have climbed by a third since the start of the year on strong sales growth, were two U.S. cents higher in London trade at $13.72 by 0925 GMT.
(Additional reporting by Zoran Radosavljevic in Zagreb) ($1=1.057 Euro)