GHO to explore Sterling Pharma exit this year

Claude Risner , Rachel Lewis , Kezia Joseph and Joao Grando
21 March 2022

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Sterling Pharma Solutions, a UK pharma manufacturing services asset owned by GHO Capital, is expected to come up for sale this year, five sources familiar with the situation said, with two of these sources pointing to a H2 2022 event.

The timing of the process is likely to be at least six months off, one of the sources said.

The private equity firm is also yet to appoint a sell-side advisor to guide the transaction, three of the sources said. Jefferies worked on the sell-side last time it came on to the block, as reported by Mergermarket.

The contract and development and manufacturing company (CDMO), which specialises in APIs, could be marketed off around GBP 50m EBITDA, three of the sources said. That would be more than double the USD 20m (GBP 15m) marketed figure when GHO invested in early 2019, according to a Mergermarket report.

The asset has sales of EUR 225m, said one of the sources.

Earlier this month, the company acquired a large active pharmaceutical ingredient (API) manufacturing facility in Ringaskiddy, Ireland off Novartis and the sale is not expected to close until 4Q22.

In the year to 31 March 2021, Sterling generated GBP 112m in revenue from its core pharmaceutical API and waste treatment service lines and an additional GBP 8m from research and development credit, metal and waste recovery and insurance claims, according to its most recent publicly available accounts.

However, that was before it acquired a facility in Deeside, North Wales and the Ringaskiddy campus. Sterling also acquired a site in Wisconsin, US in October 2020, halfway through the period.

Sterling will attract private equity firms who are likely to outbid strategics in the auction, one of the sources suggested.

"The business has performed really well and private equity firms will be very interested," he said.

Its peer Quotient Sciences, also a former GHO portfolio company, was sold to Permira in 2019 for around 20x GBP 30m EBITDA, as reported.

Sterling is a provider of small molecule API development and manufacturing services, headquartered in Dudley in the northeast of England. Founded in 1969, it had been owned by various trade entities until 2016, when it underwent an MBO and rebranded as Sterling Pharma Solutions. It employs more than 1,000 people across five facilities in the UK, US and now Ireland.

It has a strong market position within the API niche, one of the sources said, as it has unique abilities.

Sterling has followed the well-trodden path of European CDMO/CROs expanding into the larger, more lucrative US market. In 2020, it acquired the site in Germantown, Wisconsin to add to an existing facility in Cary, North Carolina. It generates roughly half of its revenue from the UK and the rest of Europe and the other half from the rest of the world, according to Companies House filings.

GHO did not return requests for comment.