Watson Pharmaceuticals buys Ascent Pharmahealth Ltd. for $393 million

The Australia and Southeast Asia generic pharmaceutical business, formerly owned by Strides Arcolab Ltd., markets a broad portfolio of generics, brands, branded-generic and over-the-counter products in Australia with an approximately 14-percent market share

Jeffrey Bouley
PARSIPPANY, N.J.—Watson Pharmaceuticals Inc. has acquired Ascent Pharmahealth Ltd., the Australia and Southeast Asia generic pharmaceutical business of India-based Strides Arcolab Ltd., for AU$375 million in cash, or about $393 million in U.S. dollars, making Watson the fifth-largest generic pharmaceutical company in Australia based on revenue.
 
In addition, the combined company will be the second-largest in that market in terms of total molecules. Because of this deal, Watson also becomes the largest generics company in Singapore and gains an established commercial base in Malaysia, Hong Kong, Vietnam and Thailand. Watson expects the transaction to be immediately accretive to 2012 non-GAAP earnings.
 
Ascent has beenserving markets in Australia, Singapore, Malaysia, Hong Kong, Vietnam,Thailandand other Asian countries with a range of generic pharmaceuticals,consumer skincare and over-the-counter (OTC) medicines. Ascent is reportedly one of Australia'sleading suppliers of healthcare products to pharmacies and is rankedamong the top-five generics companies in the Australian market. Watson notes that it isalso a major player in the consumer health market with well-establishedbrands like Avene, Hairy Lemon, Estelle and Dermorganics organic skincare products. 
 
In addition, Ascent brings into the Watson fold aregional manufacturing facility located in Singapore that manufacturesprescription and OTC products in various dosages for the SoutheastAsia market.
 
Ascentmarkets notes just a broad portfolio of generics but also branded and branded-generic products, and enjoys a share of the Australian market that sits at approximately 14 percent. In the Southeast Asiamarket, Ascent markets branded-generics and OTC products and issupported by a sales force of approximately 45 representatives. Thecompany employs some 300 employees in Australia and Southeast Asia in totaly, and Ascent's businesses in Australia and Southeast Asia had total sales of approximately AU$150 million in 2011, or about $157.2 million in U.S. dollars.
 
"Weare committed to expanding our international commercial operations intogeographies where we can capitalize on our existing assets andparticipate in growing and emerging markets," said Paul Bisaro, Watson's president and CEO. "This acquisition immediately establishes Watsonamong the leaders in the AU$12 billion Australian pharmaceuticalmarket, where the generic market is growing at approximately 8 percent.This acquisition complements our existing generic development andmarketing capabilities in the important Australiamarket, and catapults us to a top five position that would have takenconsiderable time and investment to build organically. It also providesus with a leadership position in Southeast Asia,a region with more than 600 million consumers and overall annualgeneric sales of approximately AU$4 billion a year, which is projectedto grow at more than 8 percent annually."
 
"The acquisition of Ascent provides Watson with a successful commercial structure in both Australia and Southeast Asia;we will retain the proven sales and marketing teams that have drivenAscent's growth; we will have a larger portfolio of products, and gain abroader pipeline of products to support continued growth," Bisaroadded. "We anticipate a seamless and rapid integration of the Ascentbusinesses."
 
Watsoncurrently operates in the Australian marketplace through itssubsidiary, Spirit Pharmaceuticals, which supplies products to thirdparties and has what Watson call "a successful development track record and robustpipeline of products, including significant patent challenges." Watsonalso operates through its Willow Pharmaceuticals subsidiary, whichdevelops, sources and markets products with an emphasis on injectables.During 2010, the Company established the Watson Pharma Co. toconsolidate its position in Australia and support growth in themarketplace. Watson anticipates that it will be that entity that will directly manage the Ascentassets.
 
"The sale of Ascent is a value-enhancing and forward-looking initiative for Strides," said Arun Kumar, executive vice chairman and group CEO of Strides Arcolab. "We havebeen clear about our intention to focus on our highly attractivesteriles segment, which we expect to be our growth engine going forward.The transaction further facilitates the execution of this strategy andunlocks significant value for the [Strides Arcolab] group. Furthermore, the proceedsfrom the transaction considerably strengthen our balance sheet. Webelieve that Ascent and its employees in Australia, Singapore and all of its other markets will benefit from the continued development under its new owners."
 
Watsonfunded the transaction using a combination of cash-on-hand and money borrowed from itsrevolving credit facility. The transaction was signed andclosed simultaneously.
 
Following the announcement of the deal, Strides share prices climbed 17 percent, the biggest jump the company has seen since mid-2004, to 478.50 rupees at the close in Mumbai trading.


Jeffrey Bouley

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