Promoters of Suven Pharmaceuticals will dilute up to 50 percent stake in the company to Private Equity firm Advent International, for a sum of Rs 6,300 crore, the management told CNBC-TV18 in an interview.
Subsequently, Advent International has launched an open offer to acquire another 26 percent stake from public shareholders of Suven Pharma. Through the Open Offer, Advent intends to acquire 6.61 crore shares of Suven Pharma at Rs 495 apiece, for a total consideration of Rs 3,276 crore.
Earlier this morning, Suven Pharma announced that Advent will acquire a "significant" stake in the company, without mentioning the deal size or the quantum of the stake sold.
The PE firm signed a definitive agreement from the Jasti Family for the same.
Based on the September quarter shareholding pattern, Suven Pharma promoters held a 60 percent stake in the company.
Explaining the rationale behind the move, Suven Pharma MD Venkateswarlu Jasti said that they were unable to put a proper succession plan in place, triggering this move. Jasti further said that Advent will eventually get controlling stake of the company.
The deal will fetch Rs 6,300 crore to the company, according to Jasti and is also EPS accretive for its shareholders. He further added that the company has now raised money for Suven Life for the next three years.
Post the acquisition, Advent intends to explore the merger of its portfolio company, Cohance Lifesciences with Suven, to build an end-to-end CDMO and Merchant API player, that will cater to the pharma and specialty chemicals market.
Suven Pharma was demerged from its parent entity Suven Life Sciences in 2020. It is one of the leading Contract Development and Manufacturing Organisation (CDMO) player. It currently has a strong pipeline of phase 3 and late phase 2 molecules with over 100 active projects.
Cohance Lifesciences is wholly-owned by Advent and was formed last month to create a new brand identity for its CDMO and API platform, to bring together three Advent companies - RA Chem Pharma, ZCL Chemicals and Avra Laboratories. Cohance's CDMO and API businesses cater to development and manufacruring for pharma and specialty chemical innovators. It also has seven manufacturing facilities.
For financial year 2022, Cohance recorded a proforma revenue of nearly Rs 1,280 crore. Proforma revenue is something that excludes certain costs that a company believes result in a distorted picture of its true profitability or in simpler words, projections over a period that has not yet occurred.
Advent wants to build Suven as the third-largest CDMO firm in the country. The PE firm is targeting revenue of Rs 1,300 crore and EBITDA margin of 28 percent in the first half of the current financial year.
In an interaction with CNBC-TV18, Shweta Jalan of Advent International said that the margin of the combined entity will be around 30 percent and that Venkat Jasti will continue to lead the company.
On a consolidated basis, Jalan expects both the companies to be of equal size and also sees a healthy balance sheet.
Advent currently has investment commitments worth over $3.2 billion across 14 companies in India.
Shares of Suven Pharma have given up all of the early morning gains, currently trading 1.7 percent lower at Rs 487.55.