Astorg kickstarts sixth fund with HRA Pharma SBO

The SBO will see Astorg and Goldman Sachs acquire HRA from minority shareholder Riverside Company and the founders. Both the selling GP and the executives will re-invest alongside the management team to retain a stake in the newco.

Speaking to unquote", a source familiar with the situation revealed that Astorg will control a 55% stake in HRA, while Goldman Sachs will have a significant minority holding. The company's enterprise value remains confidential but the same source confirmed it fell within the €300-500m range.

The deal is the first to be financed through Astorg's sixth fund, which recently launched with a €1.5bn target and a €2bn hard-cap. According to the unquote" source, given current developments it is "quite likely" that Astorg VI will hit the latter figure when fundraising completes before year-end. In the meantime, Astorg is currently working on sourcing potential new portfolio companies for the fund.

The deal marks the end of a process that began during the summer of 2015. At the time, Astorg, which was familiar with HRA since 2014, approached the company's owner and chairperson André Ulmann. The executive was working to list the business and had already mandated bookrunners to prepare the process.

Exclusive talks ensued between the GP and Ulmann, who was convinced to freeze the IPO plans and move towards an LBO due to volatility in the public markets. In addition, the debt component allowed the founder to retain a larger stake in the business, compared to a public listing.

During the negotiations, Astorg decided to bring in Goldman Sachs' private equity arm as a co-investing partner. The move was prompted by the deal's large size and the plans by HRA to expand in the US market, where the Goldman Sachs name carries significant weight. 

Following the shareholder reshuffle, HRA intends to continue the growth it has shown over the past few years. The business intends to keep a busy pipeline for its reproductive health and endocrinology therapies, and plans to focus on the US market as it grows both organically and via bolt-ons.

Debt
The takeover of HRA was supported by a unitranche facility, unquote" understands.

Previous funding
The deal will mark a partial exit for mid-market GP Riverside, which controlled an estimated 26% stake in HRA since buying it from CM-CIC and several individual shareholders in November 2011.

According to partner Karsten Langer, who led the deal on Riverside's behalf at the time, the GP was approached by an investment bank. HRA, keen on strengthening its balance sheet, had mandated the institution to set up an auction to seek a financial sponsor.

"One of the main reasons why HRA was looking for an investor in 2011 was to look stronger in the eyes of big pharma companies. At the time, the business was negotiating distribution agreements with those all across the globe," Langer told unquote".

Having been contacted by the intermediary in Q2 2011, Riverside won the auction in November and proceeded to support HRA as it launched four new therapies; the move has led to a 95% revenues uptick over the past four years, according to the GP. Under the firm's stewardship, HRA grew to operate directly in 11 European countries, up from five, and indirectly in more than 80 countries across the globe.

According to Langer, Riverside had agreed with the founders to start working towards an exit around 2016. The initial plan was an IPO but while preparations were underway for the flotation, contacts were also established with both trade and financial buyers. Of all interested parties, Astorg prevailed because of the speed and the determination with which they moved to acquire the asset, the partner added. 

Company
Founded in 1996, HRA develops therapies with a focus on women's reproductive health and endocrinology. The business first went to market with a levonorgestrel-based emergency contraceptive pill, reportedly the first of its kind to be sold worldwide. This was followed by the release of another contraceptive, ellaOne, and non-surgical uterine fibroids therapy Esmya.

Headquartered in Paris, HRA operates sales and marketing subsidiaries in Madrid, London, Geneva, Rome, Brussels and Bochum, and works with 50 partners worldwide. Employing 130 staff, the company generated close to €85m in revenues and a €15m EBITDA in 2015; the company claims to allocate 15% of its turnover figure to research and innovation.

People
Astorg Partners – Thierry Timsit (managing partner); Judith Charpentier (director); Charles-Hubert le Baron (associate); Olivier Lieven (analyst).
Goldman Sachs Merchant Banking Division – Michael Bruun (managing director); Scarlett Omar-Broca (executive director); Alexandre Flavier, Adam Dawson (principals).
Riverside Company – Karsten Langer (partner); Jeroen Lenssen (vice-president).
HRA Pharma – André Ulmann (co-founder, chairperson); Erin Gainer (CEO).

Advisers
Equity – Natixis Partners (corporate finance); Latham & Watkins (legal); Linklaters (legal); Sullivan and Cromwell (legal); Ashurst (legal); PwC (financial & social due diligence, tax); LEK (commercial due diligence).
Vendors – Rothschild (corporate finance); K&L Gates (legal); Monod-Amar-Boud (legal).
Company – Jones Day (legal); Rothschild (corporate finance); BNP Paribas (corporate finance); Deutsche Bank (corporate finance); Jefferies (corporate finance).

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• Topics
• Exits
• Buyouts
• Healthcare
• France
• France
• Secondary buyout
• Astorg Partners
• Goldman Sachs
• Riverside