Orchid seals Hospira deal

The completion of BTA and CDR implementation are expected to help Orchid Pharma to rebuild the business

US-based injectable drugs major Hospira Inc has completed the acquisition of the Active Pharmaceutical Ingredient (API) manufacturing facility and associated research and development (R&D) facility from Chennai-based Orchid Chemicals and Pharmaceuticals Ltd, almost two years after it first entered into agreement for the acquisition. Orchid Pharma has also announced that it had completed the implementation of the approved Corporate Debt Restructuring (CDR) package along with the BTA.

The acquisition of the manufacturing facility in Aurangabad, Maharashtra and R&D facility in Chennai is for around $218 million after settling prior advances of around $30 million.

Orchid Pharma, which has been reeling under debt for the past few years, has around Rs 3,500 crore, according to recent reports. The proceedings from the business transfer also became part of the Corporate Debt Restructuring (CDR) process announced by the company earlier.

The company has been having high levels of debt since it redeemed its outstanding FCCBs in February 2012. Through the CDR process and the Business Transfer, which has been added as a part of the restructuring process into the CDR package, the company will be able to retire a portion of its overdues and by utilising the balance portion of funds for its working capital needs, restructure and balance debt over a period of 10 years.

 

With the completion of BTA and implementation of CDR package has facilitated the scaling down of the debt levels, restructuring of the balance debt and has also ensured working capital availability for the company that will help it to resurrect operations, said K Raghavendra Rao, managing director, Orchid Pharma.

 

"With our inherent strength in the Cephalosporins segment supported by the strong Non-penicillin, Non-cephalosporin product pipeline and our quality credentials, we are confident that our rebuilding, process will be fast and robust," he added.

 

Of the total inflow of Rs 1,207 crore, incluidng Rs 1134 crore from sale proceeds and Rs 73 crore from promoter contribution, the company will retire Rs 681 crore to the Banks and after payment of tax of Rs 47 crore and the balance of Rs 479 crore will be utilised for working capital and growth needs.

 

"Hospira's acquisition of the Orchid API facility will support supply continuity of key beta-lactam antibiotic products, improve our cost position and pave the way for future API development," said C Bhaktavatsala Rao, president and managing director, Hospira India.

 

The manufacturing facility has capabilities for manufacturing sterile APIs and employs around 665 employees including chemists, engineers and technicians. The R&D facility will be directed primarily to beta-lactam and other API development with around 110 scientific personnel.

 

After the deal, Orchid Pharma retains its cephalosporin API business and facilities, and certain non-antibiotic, non-sterile businesses and facilities it owns. It will also continue to supply Hospira with cephalosporin APIs.

 

As reported earlier, the Hospira and Orchid Pharma announced that they have entered into a Business Transfer Agreement (BTA) in August, 2012, for around $200 million. Orchid Pharma, which has been in debt crisis for some time, also saw some of its creditors challenging the BTA in various legal platforms. The BTA was renewed in the year 2013 and there was an increase in the size of acquisition. However an interim stay from a Debt Recovery Tribunal in Chennai on a petition of ING Vysya blocked the completion of the BTA for almost a year. The stay against the BTA was vacated by the Tribunal on June 17, 2014.