When Wockhardt decided to sell its animal health business, it expected to get about Rs 150 crore for it. When the business was actually sold, to a French company Vetoquinol, the consideration remained undisclosed. So, if it met its target or fell short of it since exceeding it seems unlikely. The pharmaceutical company is selling non-core businesses in a bid to raise cash and lower its bloated debt.
Vetoquinol and what it gets
Vetoquinol, a French animal health company, had revenues of 234.4mn euros in 2008 with about 70% coming from Europe and 25% from the USA. The Indian acquisition is significant, as it will add 5% to its turnover. It also gets a 5% market share in the Indian market for animal health products. While Wockhardt’s animal health division focuses on products for ‘production’ animals like cattle and poultry, the French company will focus on pets too. Etienne Frechin, chairman, Vetoquinol, said major synergies will be achieved quickly, particularly through the marketing of Vetoquinol’s products.
Wockhardt employed about 140 people in this division and its sales grew by about 10% in the past three years. The division has revenues of Rs 77 crore and earnings before interest, depreciation, tax and amortisation (EBIDTA) of Rs 18 crore. Its exit will make a small dent in Wockhardt’s revenues of Rs 3,601 crore in 2008 (December year end) but will yield hard cash, which it can use to lower its debt. The company’s debt to equity has jumped to 4.2:1 and it has approached the corporate debt restructuring cell to restructure its loans. The deal is expected to be completed in the second half of 2009.
How much may Wockhardt have got?
Wockhardt’s division was growing at a good rate of about 10% in the past three years. Its profitability level was also high, with EBIDTA/Sales of 23.3%. These two factors, and it being the sixth largest company in a fast growing market, would have ensured the actual consideration was not very far from its targeted one. At Rs 150 crore, the price/sales works out to about 2 times which may seem a bit high but given its profitability levels. Vetoquinol trades at about 0.7 times on NYSE Euronext. Of course, emerging market valuations are typically higher, how much we will know only when Wockhardt chooses to divulge this information, maybe in its 2009 annual report.