DPE sells stake in PharmaZell to Bridgepoint

Maxburg Capital Partners also sold its stake to Bridgepoint.

Bridgepoint deployed equity from Bridgepoint Europe VI, which closed on €5.7m in December 2017.

As reported by Unquote sister publication Mergermarket, DPE mandated Rothschild to run the sale process in August 2019, marketing the asset from €55m EBITDA for LTM to March 2020

Mergermarket reported in January 2020 that Bridgepoint, Cinven, CVC Capital Partners and Novalpina Capital Partners had advanced to the final round of the sale process. Advent international also advanced with a bid via its portfolio company Industria Chimica Emiliana, as did Bain via Centrient.

Asked about the process, Carsten Kratz, senior partner at Bridgepoint, told Unquote: "This is an extremely attractive asset, in a growing market with good underlying margins. It is very resilient to cycles, so you can imagine that several financial sponsors would be interested. We have been following the asset for quite some time. We invested early on in the process and I think that's what made a difference at the end: we came up with a deal proposition at an early stage."

Kratz explained the GP's strategy for PharmaZell: "We are a growth investor, we always try to grow the business be it organically or with M&A. This is the perfect asset, so both dimensions play a role – they have a very attractive portfolio and we want to double down on this. But at the same time, this is a space where there is room for consolidation in many geographies."

Deutsche Private Equity bought a stake in PharmaZell in December 2013. Commerzbank, GE Capital and NIBC provided a debt package to support the deal. At the time, the GP was deploying from DPE Deutschland II, which held a final close in April 2013 on €350m.

Asked about the company's growth until this point, Kratz said: "Under DPE's leadership, it's been a really nicely growing business over many years, and it also has a very good profit margin for industry standards. The growth was above industry expectations for the sector it is involved in. We want to accelerate and deliver that growth."

DPE had not returned requests for comment at the time of publication.

Previous funding
Auctus Capital Partners formed PharmaZell in June 2006 after it bought the pharmaceutical division of listed Lubrizol Group. Management also took a significant stake in the company. The transaction was valued at around €20m and was supported by a senior debt package from BHF Bank.

EQT provided growth financing to the company in June 2007 via EQT Expansion Capital I. 

Ergon Capital Partners wholly acquired the biotechnology firm from Auctus and EQT in 2011. Ergon invested via Ergon Capital Partners II. Ares Capital provided a unitranche facility. The GP then merged PharmaZell with existing portfolio company Zambios.

Company
PharmaZell has 900 employees across sites in Germany, Italy and India. It is headquartered in Raubling. It manufactures niche generic active pharmaceutical ingredients (APIs), including products related to steroids, mesalamine, sterile cephalosporins, amino acids and propafenone.

The company reported €12.2m gross profit and revenues of €118m in the year to 31 March 2018, according to company filings.

People
PharmaZell – Oliver Bolzern (CEO).

Advisers
Equity – Alantra (M&A); HSBC (M&A); Freshfields (legal); EY (financial due diligence, tax); BCG (commercial due diligence).
Vendor – Rothschild (M&A); Latham & Watkins (legal); Deloitte (financial due diligence, tax); LEK (commercial due diligence); ERM (ESG due diligence).

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