transactions in chemicals & pharmaceuticals · 2020-04-23 · tions. for example, roche’s...

HIgHLIgHtS

M&A market was relatively tame in 2013 – the number of deals declined by 10 % over 2012 and there were no deals greater than $10 billion in the top global deal lists for chemicals and pharmaceuticals.

Emerging markets such as China and Russia continue to play an important role.

Strategic buyers, seeking product portfolio and market synergies, dominate pharmaceutical transactions.

Disposals to focus on core business continue to be in trend in chemical transactions with excess cash from sales proceeds used to increase shareholder returns. Financial buyers are picking up the assets.

Non-traditional consideration is being used to bridge valuation gaps in pharmaceutical transactions.

MARket outLook

(based on survey conducted by KPMG in collaboration with “Mergers & Acquisitions” magazine)

Pent-up demand will facilitate deal activity in 2014. Healthcare, pharmaceuticals, life sciences are anticipated to be among the most active industries, right behind technology.

Middle market is expected to be most active – 77 % of survey respondents anticipate enterprise value per transaction to be less than $250 million.

Most active markets will be US, Western Europe and China.

Deal CapsuleTransactions in Chemicals & Pharmaceuticals

March 2014

“ Strong balance sheets and the economic recovery in Europe point to brisk M&A activity in 2014. ”Vir Lakshman, kPMg, germany Head of Chemicals & Pharmaceuticals, germany

FIguRe 01 Deals by sector 2009 – 2013 1

Sources: Thomson One, KPMG

1.600

1.400

1.200

1.000

800

600

400

200

0

20102009 2011 2012 2013

Num

ber

of d

eals

Pharmaceuticals Chemicals

1,3431,475 1,428 1,372

1,240726

835 814 796703

617 640 614 576 537

1 Pharmaceuticals include biotechnology; Chemicals include plastic and rubber components and chemical and nonmetallic mineral mining.

FIguRe 02 Deals by region 2009 – 2013


North America Europe Asia-Pacific Latin America Africa, Middle East, Central Asia

1.600

1.400

1.200

1.000

800

600

400

200

0

Num

ber

of d

eals

2013

1,240

391

391

368

4743

2012

1,372

432

439

397

7232

2011

1,428

465

434

413

7541

2010

1,475

522

459

390

6539

2009

1,340

427

415

431

3334


FIguRe 03 Deal value by sector 2009 – 2013 1

20102009 2011 2012 2013

Dea

l val

ues

($ b

illio

n)

Pharmaceuticals Chemicals

250

200

150

100

50

0

109 10969

51

3276

81

9647

61

33194

227

120

177

2 | Deal Capsule | Pharmaceuticals | March 2014

Pharmaceuticals

In 2013, seven out of the top 10 global deals involved US bidders. Four of the top global deals approached the $10 billion mark.

Analysis by sectorStrategic investors from the pharmaceutical sector ac-counted for more than 50 % of the number of deals in 2013 (or 87 % in terms of total deal value). Financial investors accounted for 19 % of the number of deals (or less than 4 % of total deal value) in 2013.

Many of the top ten acquirers bought mainly to expand their product portfolio and to strengthen their market position.

For example, Amgen acquired Onyx Pharmaceuticals to build on strengths in cancer therapies. Valeant Pharmaceu-ticals bought Bausch & Lomb to gain leadership in both der-matology and eye health. Actavis acquired Warner Chilcott to expand its Specialty Brands portfolio.

unlocking value through divestments via IPosTwo large 2013 spin-offs not included in our deal list but worthy of mention are Abbott Laboratories’ spin-off of AbbVie ($56 billion market capitalization at flotation) as well as Pfizer’s sale of 20 % of its animal health business, Zoetis, in an IPO ($2.2 billion market capitalization at flotation).

Companies are using excess cash flow to increase share-holder returns (through buybacks and dividends) and/or to reduce debt.

Share repurchases for Pfizer ($10 billion), Abbott ($5 billion), Celgene Corp ($5 billion), Forest Laboratories ($1 billion) and AbbVie ($1.5 billion) are some major examples.

use of contingent consideration to bridge valuation gapsDue to inherent transaction risks in the pharmaceuti-cal industry, contingent consideration is often used to bridge valuation gaps.

The value of contingent consideration across our global top 10 deal list represented 7 % (9 % for the European top 10 deals) in 2013. Among the top global deals in which contingent consideration was negotiated, the contingent portion ranged from 14 % up to 51 % of total deal value.

Contingent consideration can be based on measur-able performance milestones, such as sales or EBITDA targets or on non-financial events such as regulatory approval.

For example, Biogen Idec has agreed to pay contingent consideration based on the sales of the drug, Tysabri®, acquired from Elan – 12 % of global net sales for the first twelve months, 18 % thereafter up to $2 billion and 25 % of annual global net sales that exceed $2 bil-lion. Elan, the seller, has stated that Tysabri® sales may reach $2.5 billion to $3 billion by 2016.

DeAL FoCuS AReAS

Top deals in 2013 were made by strategic investors and generally focused on promising therapy areas such as cancer, infectious diseases and aging related areas.

FIguRe 04 Top 10 pharmaceutical deals worldwide


200

150

100

50

0

20102009 2011 2012 2013

Dea

l val

ues

($ b

illio

n)

Strategic Investor Financial Investor

171.8

30.6

171.8

35.3

66.8

62.740.9 46.8

46.842.84.7

4.11.9

FIguRe 05 Pharmaceutical deals by acquiring sector 2013 in %

Other Investors include unspecified individual and group investors and special purpose acquisition companies.


Pharmaceuticals Financial Investors Other Investors Consumer Markets Public Sector

Technology & Business Services

Diversified Industrials Chemicals Other Sectors

18

11

10

4552

2

2

3

3

© 2014 KPMG AG Wirtschaftsprüfungsgesellschaft, a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks of KPMG International.

March 2014 | Pharmaceuticals | Deal Capsule | 3

The deal value of the global top 10 deals in 2013 was $ 46.8 billion

The deal value of the European top 10 deals in 2013 was $ 26.4 billion Bidder target therapy area Value 3 Contingent

payments 3total value 3

Perrigo Co. Elan Corp. PLC Multiple neuropsychiatric indications 8.6 8.6

Actavis Inc. Warner Chilcott PLC Women’s healthcare, gastro- enterology, urology, dermatology

8.5 8.5

Biogen Idec Inc. Tysabri® (drug Elan Corp. PLC) Multiple sclerosis 3.3 1.9 5.2

Aspen Pharmacare Holdings Ltd.

API manufacturing plant of Merck & Co. in Oss, NL

Active pharmaceutical ingredient (heparin)

1.0 1.0

BASF Pronova BioPharma ASA Omega-3 products 0.9 0.9

Syngenta Crop Protection AG

Devgen N. V. Agricultural biotechnology 0.5 0.5

Kinetic Concepts Inc. Systagenix Wound Care Ltd. Surgical wound care 0.5 0.5

Pharma Strategy Partners GmbH 4

Acino Holding Ltd. Drug delivery forms 0.4 0.4

MedImmune LLC (part of AstraZeneca PLC)

Spirogen Limited Cancer research 0.2 0.2 0.4

Clovis Oncology Inc. EOS S.p.A. Cancer 0.2 0.2 0.4

tABLe 02 EUROPEAN TOP DEALS 2013 2

Sources: Thomson One, KPMG Blue numbers are estimated values. Financial investors are italicized.

Bidder target therapy area Value 3 Contingent

payments 3total value 3

Amgen Inc. Onyx Pharmaceuticals Inc. Cancer 9.7 9.7

Valeant Pharmaceuti- cals International Inc.

Bausch & Lomb Inc. Eye-care 8.7 8.7

Perrigo Co. Elan Corp. PLC Multiple neuropsychiatric indications 8.6 8.6

Actavis Inc. Warner Chilcott PLC Women’s healthcare, gastro- enterology, urology, dermatology

8.5 8.5

Biogen Idec Inc. Tysabri® (drug of Elan Corp. PLC)

Multiple sclerosis 3.3 1.9 5.2

Mylan Inc. Agila Specialties Pvt Ltd. Penicillin, oncology drugs, sterile injectables

1.6 0.3 1.9

AstraZeneca PLC Pearl Therapeutics Inc. Respiratory diseases (including COPD, asthma)

0.6 0.6 1.2

Aspen Pharmacare Holdings Ltd.

API manufacturing plant of Merck & Co. in Oss, NL

11 branded drugs: hormones, anticoagulant, steroid, thyroid, oral contraceptives, vitamin B

1.0 1.0

Johnson & Johnson Aragon Pharmaceuticals Inc. Hormonally-driven cancer 0.7 0.3 1.0

Allergan Inc. MAP Pharmaceuticals Inc. Neurology (migraine) 1.0 1.0

tABLe 01 GLOBAL TOP DEALS 2013 2

2 The deals include closed M&A activities in pharmaceuticals and biotechnology. 3 In $ billion 4 A subsidiary of the international investors Avista Capital and Nordic Capital

Sources: Thomson One, KPMG Blue numbers are estimated values.


4 | Deal Capsule | Pharmaceuticals | March 2014

FDA approvals fell, but drugs approved offer high blockbuster potentialThe number of approved drugs and biologicals fell from 43 in 2012 to 33 in 2013. However, their expected fifth year sales are estimated at $25.4 billion, 50 % higher than that of 2012. For some large pharmaceutical companies on the list, their 2013 approved products resulted from past transac-tions. For example, Roche’s 2009 buyout of Genentech brought it Kadcyla, a drug approved in 2013. GSK’s 2009 joint venture with Pfizer developed Tivicay, a drug also approved in 2013. There are also successful smaller companies which acquired their 2013 approved drug from past transactions. For example, Biogen’s 2006 acquisition of Fumapharm brought it Tecfidera. Gilead’s 2012 acquisi-tion of Pharmasset brought it the approved drug Sovaldi. All four of these drugs have blockbuster potential ranging from $2 to 4 billion.

APPRoVeD DRugS

In the twelfth five-year plan (2011 – 2015) the Chinese gov-ernment defined nine key strategic industries including life sciences. As a result, Chinese pharmaceuticals companies are integrating their value chain vertically. For example, Walvax, a pharmaceutical company focused on biotechnol-ogy and blood preparations, undertook a series of acquisi-tions totaling $240 million.

Given the difficulties accessing the Chinese capital market with IPOs, VC/PEs are selling their investments to listed companies. A recently announced large ‘back-door’ listing is the $910 million acquisition of Jiangsu Jichuan Holding Group Co. by Hubei Hongcheng Gen Mach Co.

CHInA

European pharmaceutical companies have performed consistently better than the Bloomberg European 500 Index average with the spread becoming wider over the last two years as we move beyond the patent cliff.

CAPItAL InDex

FIguRe 07 Top 10 pharmaceutical deals in Europe


30

25

20

15

10

5

0

20102009 2011 2012 2013

Dea

l val

ues

($ b

illio

n)


7.8

7.3

17.3 18.3

18.315.2

11.4

26.0

26.4

12.7

0.4

1.3

2.1

0,6

FIguRe 08 Development of share prices

Sources: Bloomberg, KPMG

300275250225200175150125100

01.2

00

9

01.2

00

8

01.2

010

01.2

011

01.2

012

01.2

013

01.2

014

01.2

007

Bloomberg European 500 Index BE500 Pharmaceutical Index

FIguRe 06 Deals in BRICS countries


China India

Russia South Africa

Brazil BRICS deal value

150

100

50

0

15

10

5

0

20102009 2011 2012 2013

Num

ber

of d

eals

86104

131 126

41

61

83 7973

11

15 13 1411

3020

21 20 222

2

1011

4 3 38

8

2

Val

ue (

$ bi

llion

)120


March 2014 | Chemicals | Deal Capsule | 5

Chemicals

In 2013, chemical deals were also bolt on transactions, no mega deals, all of the top 10 deals are each under $5 billion, both globally as well as for Europe.

Companies are using excess cash flow to increase share-holder returns (through buybacks and dividends) and/or to reduce debt. DuPont used proceeds to initiate a $1 billion share buyback and debt reduction. Ashland plans to use the net proceeds from the sale of its water business to return capital to shareholders.

uS dominates the M&A sceneThe increased deal activity in the US is being driven by business restructuring spurred on, for example, by activist investors and the shale gas phenomenon. In the US, activist investors have taken stakes in DuPont, Air-Products, Ashland, Ferro, American Pacific and Calgon Carbon.

US domestic shale gas production is driving lower en-ergy prices resulting in a new competitive edge for US businesses. This is driving a huge interest for specialty chemical assets.

Moving up the value chainThe Oman acquisition of Oxea in 2013 is primarily in the intermediate area nudging this Middle Eastern company upwards along the product value chain.

DeAL FoCuS AReAS

Top deals in 2013 generally focused on downstream specialty chemicals and higher R&D based businesses.

FIguRe 09 Top 10 chemical deals worldwide


60

50

40

30

20

10

0

20102009 2011 2012 2013

Dea

l val

ues

($ b

illio

n)


14.323.1

33.3

17.7

14.813.9 11.1

15.1

28.1

51.0

17.0

26.227.9

2.2

4.8

FIguRe 10 Chemical deals by acquiring sector 2013 in %

5 Other Investors include unspecified individual and group investors and special purpose acquisition companies. 6 Other Sectors include 1 % pharmaceutical sector.


Chemicals Diversified Industrials Energy & Natural Resources Consumer Markets Financial Investors Other Investors 5

Other Sectors 6

4615

9

98

6

7

Chemical companies continue to divest non-core assets to focus on core higher margin businesses. In many instances, private equity buyers are picking up the assets. examples of 2013 disposals to private equity

DuPont sold its performance coatings business to concentrate on three integrated competencies: agriculture and nutrition, advanced materials and biotechnology.

PPG disposed of its commodity chemicals business to focus on the higher margin generating coatings business.

Clariant AG exited its lower-margin textile chemicals, paper specialties and emulsions businesses in 2013.

Cytec Industries Inc. sold its coating resins business.

For 2014, portfolio transformation will continue as many players have announced plans to divest non-core assets:

Ashland intends to sell its water technologies and elastomer businesses.

Dow plans to divest its commodity chemicals business (US-chloralkali, global epoxy, global chlorinated organics).

DuPont is looking for a strategic alternative for its Performance Chemicals business.


6 | Deal Capsule | Chemicals | March 2014

The deal value of the global top 10 deals in 2013 was $ 26.2 billion Bidder target Business area total value 8

The Carlyle Group LP Coatings Unit of DuPont Coatings and application tools for automobile repair body shops

4.9

ONEXIM Group Uralkali OJSC Potash, mineral fertilizer 3.5

URALCHEM OJSC Uralkali OJSC Potash, mineral fertilizer 2.9

Chengdong Investment Corp. Uralkali OJSC Potash, mineral fertilizer 2.8

Oman Oil Company S.A.O.C. Oxea GmbH Oxo-based chemical products 2.4

Ecolab Inc. Champion Technologies Inc. Specialty chemicals for the oil and gas industry

2.3

Axiall Corp. (formerly Georgia Gulf Corp.)

Commodity chemicals business of PPG Industries Inc.

Chlorine, caustic soda and related chemicals

2.1

Cinven Limited CeramTec GmbH Advanced ceramics 2.0

Platform Specialty Products Corporation (formerly Platform Acquisition Holdings Ltd.)

MacDermid Inc. Chemicals for electronics, industrial, offshore and printing industries

1.9

Solvay SA Chemlogics Group Specialty chemicals for the oil and gas industry

1.4

tABLe 03 GLOBAL TOP DEALS 2013 7


7 The deals include closed M&A activities in chemicals, fertilizer, chemical and fertilizer mineral mining, clay, ceramic, rubber, and plastics (excluding oil refining enterprises). 8 In $ billion

The deal value of the European top 10 deals in 2013 was $ 17.6 billion Bidder target Business area total value 8

ONEXIM Group Uralkali OJSC Potash, mineral fertilizer 3.5

URALCHEM OJSC Uralkali OJSC Potash, mineral fertilizer 2.9

Chengdong Investment Corp. Uralkali OJSC Potash, mineral fertilizer 2.8

Oman Oil Company S.A.O.C. Oxea GmbH Oxo-based chemical products 2.4

Cinven Limited CeramTec GmbH Advanced ceramics 2.0

Advent International Corp. Allnex (formerly coating resins business of Cytec Industries Inc.)

Coating resins 1.2

Rain CII Carbon LLC Rütgers Group Base chemicals and coal tar pitch 1.0

Temasek Holdings Pte Ltd. Evonik Industries AG (4.64 %) Specialty chemicals 0.8

SK Capital Partners LP Archoma (formerly different businesses of Clariant AG)

Colors and specialty chemicals 0.6

Gazprom Pererabotka Gazprom neftekhim Salavat Petrochemicals, mineral fertilizers 0.4

tABLe 04 EUROPEAN TOP DEALS 2013 7



March 2014 | Chemicals | Deal Capsule | 7

European chemical companies consistently performed better than the Bloomberg European 500 Index average with the spread becoming wider over the last two years.

CAPItAL InDex

Chinese leadership has committed to reforms to encourage local enterprises to choose a new path of industrialization and create national champions to increase China’s self-sufficiency in chemicals and establish an environment that promotes sustainability. This has resulted in increased M&A activity, with the majority of acquisitions carried out by local companies. Chinese buyers are eager to acquire smaller technologically advanced companies, while larger deals are driven by large listed or ‘state owned enterprises’ (SOE). A recently announced large transaction is the $629 million acquisition of Henan Zhongyuan Chemical, an acetic acid and chloroacetic acid specialist by Inner Mongo-lia Yuan Xing Energy, China-based SOE.

CHInA

The number of Russian deals in 2013 fell by 45 % com-pared to 2012. However, the deal value peaked in 2013 at $10.0 billion – $9.2 billion of which is attributable to changes in the shareholding structure of Uralkali, one of the world’s largest potash producers, with a 20 % global market share.

Since the exit from BPC, one of two potash cartel organi-zations in the world, the largest shareholder of Uralkali has been under pressure to divest its holdings. To secure its strategic supply of potash, China acquired a 12.5 % interest in Uralkali via its sovereign funds, CIC. Other acquirers were URALCHEM (19.99 %) and the ONEXIM Group (21.75 %). In January 2014, the Russian Anti-Monopoly Service approved a further purchase of 27.76 % by ONEXIM Group.

RuSSIA – tHe uRALkALI StoRyFIguRe 11 Top 10 chemical deals in Europe


25

20

15

10

5

0

20102009 2011 2012 2013

Dea

l val

ues

($ b

illio

n)


9.3

4.6

18.0

2.6

9.66.7

10.911.3

20.6

11.3

17.6

4.9

1.7

0.3

2.1

FIguRe 13 Deals in BRICS countries


300

250

200

150

100

50

0

30

25

20

15

10

5

0

20102009 2011 2012

Num

ber

of d

eals

Val

ue (

$ bi

llion

)

China India

Russia South Africa

Brazil BRICS deal value

161185

215 204

5789

56

96

61

60

3028

26

39 2133

70

74

1977

9

46

2013

165

85

31

22

17

725

FIguRe 12 Development of share prices

Sources: Bloomberg, KPMG

300275250225200175150125100

01.2

00

9

01.2

00

8

01.2

010

01.2

011

01.2

012

01.2

013

01.2

014

01.2

007

Bloomberg European 500 Index BE500 Chemical Index


The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Our services are provided subject to our verification whether a provision of the specific services is permissible in the individual case.


Imprint

PublisherKPMG AG Wirtschaftsprüfungsgesellschaft Tersteegenstrasse 19 – 31 40474 Dusseldorf

Contact

Vir Lakshman *Partner, Head of Chemicals & Pharmaceuticals, Germany T +49 211 475-6666 [email protected]

Authors

Rita DuranSenior Manager, Chemicals & Pharmaceuticals, Germany

Sebastian HeinischChemicals & Pharmaceuticals, Germany

www.kpmg.de

* Responsible according to German Law (§ 7 (2) Berliner PresseG)

Basis of data preparation Values and volume used throughout the report are based on completion date as provided by Thomson Reuters’ database Thomson One as of 9 January 2014 and supple-mented by additional independent research. This report includes disclosed and undisclosed values for M&A trans-actions including minority stake purchases, acquisitions of remaining interest, and recapitalizations. It explicitly ex-cludes self-tenders and spinoffs. The published numbers of deals and deal values are based on the analysis of target companies that operate in the following subsectors:

Pharmaceuticals: – Medicinal chemicals and botanical products – Pharmaceutical preparations – In vitro and in vivo diagnostic substances – Biotechnology – biological products, except diagnostic substances

Chemicals: – Clay, kaolin, ceramic and refractory minerals – Chemical and nonmetallic mineral mining, except fuels – Fertilizers and agricultural chemicals – Industrial gases – Specialty chemicals – Plastics and rubber components

All figures in this report are shown in US Dollars ($).

SourcesOnline databases: – Thomson One – Mergermarket – S&P Capital IQ – EvaluatePharma – Bloomberg

Publications: – KPMG’s 2014 M&A Outlook Report – M&A Expected to Rebound in 2014

– KPMG China’s The emergence of local champions, September 2013

– EvaluatePharma, 2013: The year of seven blockbusters, January 22, 2014

– Various companies’ press releases

transactions in chemicals & pharmaceuticals · 2020-04-23 · tions. for example, roche’s...

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