Cinven acquires Mercury Pharma from HgCapital

Carmen Reichman
17 August 2012

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Cinven has acquired UK-based speciality pharmaceutical company Mercury Pharma in a ТЃ465m secondary buyout from HgCapital.

The GP aims to consolidate a fragmentated niche pharmaceuticals market, so a buy-and-build strategy is a likely play. It plans to make acquisitions in the early stages of the investment. The management retained its minority stake in the business.

The vending process was initiated by HgCapital-hired corporate financiers Jefferies following the GP's early achievement of its set goals for the business. HgCapital was interested in finding a successor that would take the business into the next phase of growth and widen its geographical footprint.

Cinven pre-empted the auction process after convincing the vendor with its strategic vision and strong record in the healthcare sector, HgCapital told unquote". The GP denied widespread rumours that Cinven paid more than 9x the company's EBITDA but called the offer a "fair price". The business's enterprise value was initially estimated to be around £350m.

The sale enabled HgCapital to reap a 4.1x multiple on its original investment and approximately £35.4m in cash. The return figure is expected to increase to 4.3x following the clearance of a further £1m.

The total exit represents an uplift of £19.9m over the carrying value of £16.5m in the net asset value (NAV) of the HgCapital trust at 31 May 2012. Following the sale of Mercury Pharma, the HgCapital 6 fund will have realised 20% of its invested capital.

Debt
Senior secured credit facilities of £235m were provided by Jefferies, HSBC, Lloyds Bank and Mizuho.

Previous funding
HgCapital acquired Mercury in a £178m take-private in 2009. Under Hg's ownership the company changed its senior management, bringing in John Beighton as group CEO, and refocused on its niche pharma business.

The GP sold the company's non-core assets, including properties in India and consumer health businesses, while reinvigorating organic business development with new product launches. It also focused on improving quality in the supply chain, for the benefit of customers and from a regulatory perspective.

The company nearly doubled its EBITDA in the past three years and reports sales of more than £100m.

Company
Croydon- and Mumbai-based Mercury Pharma is a pharmaceutical company formerly known as Goldshield. It was founded in 1991 and floated on the London Stock Exchange in 1998 before being taken private by HgCapital in December 2009.

The business has operations in the UK, Ireland and India and sells niche and branded pharmaceuticals to retail pharmacies and hospitals. It has a broad portfolio of products including treatments for anaesthesia, cardiovascular issues and pulmonary arterial hypertension.

People
Supraj Rajagopalan is a partner at Cinven. Philipp Schwalber is head of HgCapital's healthcare team and worked on the deal alongside Lisa Stone who is a partner in the firm's portfolio management team.

Advisers
Equity – Deloitte (Commercial due diligence, corporate finance, tax); Clifford Chance (Legal).
Management - Berwin Leighton Paisner, Raymond McKeeve, Michael Weir, Simon Arlington (Corporate finance).
Vendor – Jefferies (Corporate finance); Linklaters (Legal); Deloitte (Financial due diligence).